As filed with the Securities and Exchange Commission on ________________.
Registration No. 333-3074.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
POST EFFECTIVE AMENDMENT NO. 2 TO THE
FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
---------------------------------
NEXLAND, INC.
Formerly, WindStar Resources, Inc.
----------------------------------
(Exact name of Registrant specified in charter)
Arizona 3570 37-1356503
------- ---- ----------
(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification Code) Identification #)
Gregory Scott Levine
20801 Biscayne Blvd.
Aventura, Florida 33180
Tel: (305) 937-3877
- --------------------------------------------------------------------------------
(Address, including zip code of principal place of business and telephone
number, including area code of Registrant's principal executive offices.)
Allan M. Lerner
Allan M. Lerner, P.A.
2888 E. Oakland Park Blvd.
Ft. Lauderdale, FL 33306
(954) 563-8111
- --------------------------------------------------------------------------------
(Name, address, including zip code and telephone number, including area code of
agents for service.)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective; but from time
to time at the discretion of the exercising warrant holder according to the
terms of the A and B Warrants.
<PAGE>
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [x].
The Exhibit Index for this Registration Statement begins on sequential page
number 69.
<TABLE>
<CAPTION>
=================================================================================================================
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
Title of each Proposed maximum Proposed maximum Amount
class of securities Amount to aggregate offering aggregate offering of registration
to be registered[3] be registered price per Share[1] price [1] fee [1]
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issuable
upon the exercise
of the Class A
Redeemable
Warrants [3] 1,541,558[4][5] $ 1.00 [2] $ 1,541,558 $ 406.97
Shares issuable
upon the exercise
of the Class B
Redeemable
Warrants [3] 1,600,000[4][5] $ 5.00 $ 8,000,000 $ 2,112
Selling Shareholders 460,635[4] -- --[6]
- -----------------------------------------------------------------------------------------------------------------
TOTAL REGISTRATION FEE $ 9,541,558 $4,155.42[7]
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-ii-
<PAGE>
[1] Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended,
[2] The A Warrants may be exercised at a price of $1.00 per share until
June 30, 2000; thereafter the exercise price will be $2.50 per share.
[3] To be issued upon exercise of the Redeemable Warrants. The A and B
Warrants terminate on August 16, 2001, subject to prior redemption.
[4] Reflects the reverse stock split of 1 for 250 that occurred on April
15, 1998.
[5] The actual number of shares to be issued is subject to adjustment and
could be materially less or more than the estimated amount depending
upon factors that cannot be predicted by us at this time, including,
among others, the future market price of the common stock. This
presentation is not intended to constitute a prediction as to the
future market price of the common stock or as to the number of shares
of common stock, which, will be required to be issued pursuant to the
Warrants.
[6] The filing fee is based upon the closing market price of our Common
Stock on March 27, 2000. The selling shareholders' registration fee is
paid by the Company.
[7] The sum of $4155.42 was paid in connection with the filing of the
initial Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF
1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
-iii-
<PAGE>
NEXLAND, INC.
Formerly, WindStar Resources, Inc.
Cross Reference Sheet
Cross reference sheet showing location in Prospectus of information required by
Items of Form S-1.
<TABLE>
<CAPTION>
Item Number
and Caption Location in Prospectus
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement Outside FACING PAGE; CROSS
Front Cover Page of Prospectus REFERENCE SHEET; OUTSIDE
FRONT COVER PAGE
2. Inside Front and Outside INSIDE FRONT COVER PAGE;
Back Cover Pages of Prospectus OUTSIDE BACK COVER PAGE
3. Summary Information and Risk PROSPECTUS SUMMARY; RISK
Factors FACTORS; THE COMPANY
4. Use of Proceeds PROSPECTUS SUMMARY; USE
OF PROCEEDS
5. Determination of Offering Price OUTSIDE FRONT COVER
PAGE; PLAN OF OFFERING -
ESCROW OF FUNDS
6. Dilution DILUTION
7. Selling Security Holders SELLING SECURITY HOLDERS
8. Plan of Distribution. INSIDE FRONT COVER PAGE;
PLAN OF OFFERING ESCROW
OF FUNDS
9. Description of Securities OUTSIDE FRONT COVER
to be Registered PAGE; CAPITALIZATION -
DESCRIPTION OF SECURITIES;
PLAN OF OFFERING - ESCROW OF FUNDS
10. Interest of Named Experts LEGAL MATTERS; EXPERTS
and Counsel
11a. Description of Business PROSPECTUS SUMMARY;
PROPOSED BUSINESS
-iv-
<PAGE>
11b. Description of Property NOT APPLICABLE
11c. Legal Proceedings PROPOSED BUSINESS
11d. Market Price, Dividends PRINCIPAL SHAREHOLDERS;
and Related Stockholder CAPITALIZATION; DESCRIPTION
Matters OF THE SECURITIES; PRINCIPAL
SHAREHOLDERS;
11e. Financial Statements FINANCIAL STATEMENTS
11f. Selected Financial Data SELECTED FINANCIAL DATA
11g. Supplementary Financial NOT APPLICABLE
Information
11h. Management's Discussion MANAGEMENT'S DISCUSSION
and Analysis of Financial AND ANALYSIS OF
Condition and Results FINANCIAL CONDITION AND
of Operations RESULTS OF OPERATIONS
11i. Disagreements with Accountants NOT APPLICABLE
11j. Directors and Executive Officers. MANAGEMENT
11k. Executive Compensation MANAGEMENT
11l. Security Ownership of MANAGEMENT
Certain Beneficial Owners
and Management
11m. Certain Relationships MANAGEMENT
and Related Transactions
12. Disclosure of Commission Position PROPOSED BUSINESS
on Indemnification for Securities Act
Liabilities
</TABLE>
-v-
<PAGE>
PROSPECTUS
NEXLAND, INC. (Formerly, WindStar Resources, Inc.)
for the public offering for sale of 3,602,193 Shares of Common Stock.
We sell, distribute and outsource the manufacturing of our Internet
Sharing Boxes or ISBs, which enable any entity with an ethernet network (home or
commercial) to cost effectively share secure Internet access and email across
that network.
Our common stock is traded on the OTC Bulletin Board under the symbol
"XLND" and may be purchased upon the exercise by the warrant holders of our
Class A and/or upon the exercise by the warrant holders of our Class B warrants.
The selling security holders named under Plan of Distribution-Selling Security
Holders, are selling the shares for this offering. We will not receive any of
the proceeds from the sale of common stock by the Selling Security Holders. All
expenses of registration incurred in connection with this offering are being
borne by us, but all selling and other expenses will be borne by the Selling
Security Holders.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. WE URGE YOU TO
READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 10,
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public[1] Commission Company
--------- ---------- -------
<S> <C> <C> <C> <C>
Per Share on Exercise
of A Warrants $ 1.00[2] $ -0- $ 1.00
Total on Exercise of
A Warrants [3] $ 1,541,558[4] $ -0- $1,541,558
Per Share on Exercise
of B Warrants $ 5.00 $ -0- $ 5.00
Total on Exercise of
B Warrants [3] $ 8,000,000[5] $ -0- $8,000,000[6]
Selling Shareholders[6] $ -- $ -0- $ -0-
</TABLE>
[1] This offering is being conducted by the Company; no commissions will be
paid.
[2] On July 1, 2000, the exercise price of the A Warrant shall increase to
$2.50 per share.
[3] This offering is made on a "best efforts" basis. There is no minimum number
of Shares which must be sold.
[4] Based upon an offering of 1,541,588 common shares
[5] Based upon an offering of 1,600,000 common shares.
[6] The Company will not receive any of the proceeds from sales by the Selling
Shareholders
The Date of this Prospectus is ________, _______, 2000.
The information in this prospectus is not complete. It might change. We
are not allowed to sell the common stock offered by this prospectus until the
registration statement that we have filed with the SEC becomes effective. This
prospectus is not an offer to sell our common stock-and does not solicit any
offers to buy-in any state where the offer or sale is not permitted.
-1-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C> <C>
1. SUMMARY OF OUR OFFERING.....................................................................................-6-
1.1 OUR BUSINESS.......................................................................................-6-
1.2 THE OFFERING.......................................................................................-7-
1.3 USE OF PROCEEDS....................................................................................-7-
1.4 RISK FACTORS.......................................................................................-8-
1.5 SELECTED FINANCIAL INFORMATION.....................................................................-8-
2. RISK FACTORS................................................................................................-9-
2.1. OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR AN INVESTOR
TO EVALUATE OUR BUSINESS AND PROSPECTS............................................................-9-
2.2 WE HAVE HAD HISTORY OF LIMITED REVENUES THIS MAY CONTINUE TO BE
THE CASE..........................................................................................-9-
2.3 WE HAVE HAD HISTORY OF A LIMITED CUSTOMER BASE AND THIS MAY
CONTINUE TO BE THE CASE...........................................................................-9-
2.4 WE ARE SUBJECT TO ALL OF THE SUBSTANTIAL RISKS INHERENT IN AN
INTERNET BUSINESS, WHICH MAY HARM OUR ABILITY TO OPERATE
SUCCESSFULLY.....................................................................................-10-
2.5 IF WE CANNOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE
HARMED...........................................................................................-10-
2.6 IF WE CANNOT INTEGRATE NEW BUSINESSES, OPERATIONS, TECHNOLOGY, AND
PERSONNEL OUR GROWTH AND OUR BUSINESS COULD BE
HARMED...........................................................................................-11-
2.7 IF WE RAISE ADDITIONAL CAPITAL THROUGH THE ISSUANCE OF EQUITY OR
CONVERTIBLE DEBT, YOUR PROPORTIONATE INTEREST WILL BE DILUTED....................................-11-
2.8 WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON THE MOST
FAVORABLE TERMS..................................................................................-11-
2.9 WE COULD LOSE REVENUES AND OUR REPUTATION MAY BE DAMAGED IF OUR
SYSTEMS OR THOSE OF OUR CUSTOMERS OR OUR SUPPLIERS ARE NOT YEAR
2000 COMPLIANT...................................................................................-11-
2.10 YOU MAY NOT BE ABLE TO RESELL SHARES OF OUR STOCK AT OR FOR MORE
THAN THE PRICE YOU PAID..........................................................................-12-
2.11 THERE IS A POTENTIAL LACK OF LIQUIDITY FOR COMMON
STOCK............................................................................................-12-
2.12 IF WE TRADE BELOW $5.00 PER SHARE WE WILL BE SUBJECT TO PENNY
STOCK REGULATIONS AND RESTRICTIONS...............................................................-12-
2.13 WE HAVE A SUBSTANTIAL AMOUNT OF STOCK THAT WILL BECOME AVAILABLE
FOR RESALE UNDER RULE 144, WHICH MAY HAVE AN ADVERSE EFFECT ON THE
MARKET AND OUR ABILITY TO OBTAIN EQUITY FINANCING................................................-13-
-2-
<PAGE>
2.14 OUR ARTICLES OF INCORPORATION ALLOW AUTHORIZATION AND
DISCRETIONARY ISSUANCE OF "BLANK CHECK" PREFERRED STOCK WHICH
COULD DELAY, DETER, OR PREVENT A TAKE OVER, MERGER OR CHANGE OF
CONTROL AND MAY PREVENT YOU FROM REALIZING A PREMIUM RETURN......................................-13-
2.15 OUR BUSINESS PLAN CONTEMPLATES FUTURE INTERNATIONAL OPERATIONS BUT
THERE ARE NUMEROUS RISKS AND UNCERTAINTIES IN OFFERING SERVICES
OUTSIDE OF THE UNITED STATES.....................................................................-13-
2.16 WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR TO
CONTINUE USING INTELLECTUAL PROPERTY THAT WE LICENSE FROM OTHERS;
WE MAY ALSO BE THE SUBJECT OF INTELLECTUAL PROPERTY INFRINGEMENT
CLAIMS...........................................................................................-14-
2.17 BECAUSE OF THE UNCERTAINTY ASSOCIATED WITH UNPROVEN BUSINESS
MODELS, WE MAY BE UNABLE TO ACHIEVE WIDESPREAD MARKET ACCEPTANCE.................................-15-
2.18 WE CANNOT BE CERTAIN THAT WE WILL BE ABLE TO COMPETE WITH
SIGNIFICANT PRICING PRESSURE BY OUR COMPETITORS..................................................-15-
2.19 OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE LOSE MARKET SHARE..................................-15-
2.20 WE HAVE LIMITED MARKETING AND SALES CAPABILITY...................................................-17-
2.21.THE LOSS OF THE SERVICES OF EXISTING PERSONNEL AS WELL AS THE
FAILURE TO RECRUIT KEY TECHNICAL AND MANAGEMENT PERSONNEL WOULD BE
DETRIMENTAL AND COULD HAVE AN ADVERSE IMPACT UPON OUR BUSINESS
AFFAIRS AND FINANCES.............................................................................-17-
2.22 OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS,
TOGETHER, MAY BE ABLE TO FFECTIVELY EXERCISE CONTROL OVER ALL
MATTERS SUBMITTED TO A VOTE OF STOCKHOLDERS......................................................-18-
2.23 WE HAVE NOT PAID NOR DO WE EXPECT TO PAY DIVIDENDS IN THE NEAR
FUTURE...........................................................................................-18-
2.24 THE INSIDE SHAREHOLDERS RECEIVED SHARES FOR LESS CONSIDERATION
THAN YOU ARE ASKED TO PAY........................................................................-18-
2.25 THE OFFICERS AND DIRECTORS MAY BE ENTITLED TO INDEMNIFICATION FOR
SECURITIES LIABILITIES BY THE COMPANY RESULTING IN SUBSTANTIAL
EXPENDITURES FOR US AND PREVENTING ANY RECOVER FROM OFFICERS AND
DIRECTORS........................................................................................-18-
2.26 WE HAVE EXPERIENCED NEGATIVE CASH FLOW WHICH COULD RESULT IN OUR
INABILITY TO FUND PROGRAMS AND CREATE A NEED FOR ADDITIONAL
FINANCING........................................................................................-19-
2.27 WE DEPEND ON CONTRACT MANUFACTURERS FOR SUBSTANTIALLY ALL OF OUR
MANUFACTURING REQUIREMENTS. THE INABILITY OF OUR CONTRACT
MANUFACTURERS TO PROVIDE US WITH ADEQUATE SUPPLIES OF HIGH QUALITY
PRODUCTS OR THE LOSS OF ANY OF OUR CONTRACT MANUFACTURERS WOULD
CAUSE A DELAY IN OUR ABILITY TO FULFILL ORDERS WHILE WE OBTAIN A
REPLACEMENT MANUFACTURER.........................................................................-19-
-3-
<PAGE>
2.28 IF WE FAIL TO DEVELOP AND EXPAND OUR DISTRIBUTION CHANNELS OUR
BUSINESS WILL SUFFER ............................................................................-20-
2.29 OUR FINANCIAL RESULTS MAY PERIODICALLY VARY DUE TO FACTORS WHICH
MAY AFFECT OUR STOCK.............................................................................-20-
2.30 WE WILL HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS
OFFERING IN A WAY YOU MAY DISAGREE...............................................................-21-
3. FORWARD LOOKING STATEMENTS.................................................................................-21-
4. USE OF PROCEEDS............................................................................................-22-
5. DILUTION...................................................................................................-23-
6. CAPITALIZATION.............................................................................................-24-
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................-25-
7.1. OVERVIEW........................................................................................-25-
7.2. REVERSE SPLIT...................................................................................-27-
7.3. RESULTS OF OPERATIONS...........................................................................-27-
7.4. LIQUIDITY AND CAPITAL RESOURCES.................................................................-28-
8. OUR BUSINESS...............................................................................................-29-
8.1. GENERAL.........................................................................................-29-
8.2. EXPLANATION AND BACKGROUND OF THE INTERNET......................................................-29-
8.3. THE BENEFITS OUR PRODUCTS ARE DESIGNED TO PROVIDE...............................................-33-
8.4. A DESCRIPTION OF OUR PRODUCTS...................................................................-35-
8.5. BACKGROUND OF THE COMPANY.......................................................................-36-
8.6. BUSINESS STRATEGY...............................................................................-37-
8.7. SALES AND MARKETING OVERVIEW....................................................................-38-
8.8. COMPETITION.....................................................................................-40-
8.9. YEAR 2000.......................................................................................-42-
8.10. INTELLECTUAL PROPERTY...........................................................................-43-
8.11. EMPLOYEES.......................................................................................-44-
8.12. PROPERTY LOCATION, DESCRIPTION AND ACCESS.......................................................-44-
8.13. RESEARCH AND DEVELOPMENT........................................................................-45-
8.14. MANUFACTURING...................................................................................-45-
8.15. LEGAL MATTERS...................................................................................-46-
-4-
<PAGE>
8.16. DIVIDEND POLICY................................................................................-46-
8.17. AVAILABILITY OF INFORMATION....................................................................-46-
9. OUR MANAGEMENT.............................................................................................-46-
9.1. OUR DIRECTORS AND EXECUTIVE OFFICERS............................................................-46-
9.2. INDEMNIFICATION.................................................................................-47-
9.3. EXECUTIVE COMPENSATION..........................................................................-48-
9.4 Stock Option Plan...............................................................................-49-
10. CERTAIN TRANSACTIONS......................................................................................-50-
11. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT ..............................................-51-
12. MARKET PRICE OF SECURITIES................................................................................-53-
12.1 VOLATILITY AND FLUCTUATION OF OUR COMMON STOCK..................................................-53-
13. DESCRIPTION OF THE SECURITIES.............................................................................-54-
13.1 IN GENERAL......................................................................................-54-
13.2 COMMON STOCK....................................................................................-54-
13.3 PREFERRED STOCK.................................................................................-55-
13.4 DESCRIPTION OF REDEEMABLE WARRANTS..............................................................-55-
13.5 ANTI-TAKEOVER PROVISIONS OF ARIZONA LAW.........................................................-56-
14. SHARES ELIGIBLE FOR FUTURE SALE...........................................................................-57-
14.1 IN GENERAL......................................................................................-57-
14.2 RESTRICTED SECURITIES...........................................................................-57-
14.3 TRANSFER AGENT AND WARRANT AGENT................................................................-57-
15. SELLING SECURITY HOLDERS..................................................................................-58-
16. PLAN OF DISTRIBUTION......................................................................................-58-
17. LITIGATION................................................................................................-60-
18. LEGAL MATTERS.............................................................................................-60-
19. EXPERTS...................................................................................................-60-
20. ADDITIONAL INFORMATION....................................................................................-60-
</TABLE>
-5-
<PAGE>
1. SUMMARY OF OUR OFFERING
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROSPECTUS. IT
DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. WE URGE YOU TO
READ THE ENTIRE PROSPECTUS BEFORE CONSIDERING INVESTING IN ANY COMMON STOCK OF
OUR COMPANY.
(Nexland, Inc. and, unless otherwise noted, or if the context otherwise
requires, its former name, Windstar Resources, Inc., are referred to in this
prospectus as "Nexland," "our," "we" or " us". "WindStar" Nexland LP" and
"Nexland Fla.," may also on occasion be used to identify specific events prior
to the November 1999 reverse acquisition of Nexland Fla. by WindStar)
WindStar was formed in Arizona on March 22, 1995, (under the name
Turtleback Mountain Gold Co., Inc.) to engage in the business of mineral
exploration, and if warranted, development and production, or the sale of
precious minerals. WindStar failed to achieve its goals and business objectives
and in 1999 we concluded it was no longer economical to continue as a public
gold exploration mining company.
Nexland Fla. was incorporated in Florida on December 4, 1994, but was
inactive until November 17, 1999 when it was acquired by us. Nexland LP, a
Florida limited partnership, formed on September 25, 1997, was an operating
company until November 15, 1999 when it assigned all of its partnership assets
to Nexland Fla. in exchange for 17,000 of the latter's common shares.
On November 17, 1999, we acquired Nexland Fla. in a reverse acquisition
transaction resulting in the change of our business from mining to Internet
technology. We changed our name to "Nexland, Inc." on December 8, 1999.
1.1 OUR BUSINESS.
We provide Internet access solutions for the office or home through
sales, marketing and distribution of information technology hardware. We
develop, market, distribute and manufacture through third parties, Internet
Sharing Boxes or ISBs, that enable any entity with an ethernet network (home or
commercial) to cost effectively share secure Internet access and email across
that network. An ethernet network is a standard for connecting computers into a
local area network, i.e., a computer network limited to the immediate area,
usually in the same building, also referred to as a LAN.
Our products are a flexible and scalable platform that provides
firmware-based routing and functionality to deliver Internet-enabled
applications and services. Our products support existing analog phone lines, as
well as integrated services digital networks (ISDN) and emerging access
technologies such as digital subscriber line (xDSL) and cable modems. Our
product technology coupled with broadband Internet access enables multiple users
to access the Internet simultaneously through regular phone lines and analog
modems at up to 30-50 times the access speed of a single
-6-
<PAGE>
analog connection. We also offer Virtual Private Networking " VPN" pass-through
support (IPSec, PPTP, and L2TP) which allows the encrypted flow of data packets
over the Internet, a public domain, to pass through our devices. Additionally,
we manufacture a complete line of networking hardware such as hubs, routers,
switches, mini-transceivers and local area network or LAN cards.
We identify the home, office and home-office market as the end users of
our products although we primarily target Internet service providers, telephone
companies and value-added resellers as our immediate market. The office
environment can consist of both small and large corporate businesses and branch
or satellite offices of larger businesses. Further, we believe that emerging
broadband access technologies such as digital subscriber line (xDSL) and cable
modems will enable a variety of new data intensive, multimedia and graphical
applications that increase the value of shared Internet access for the office
environment.
We primarily market and sell our products throughout North America and,
to a limited extent, South America. Although our marketing strategy will employ
value-added resellers, selected retail outlets and mail order catalogs, we will
primarily focus upon Internet service providers and telephone companies.
1.2 THE OFFERING.
Common Shares outstanding prior to offering ..........................34,308,916
Securities offered upon
exercise of A Warrants ...................................... 1,541,558
Securities offered upon
exercise of B Warrants ...................................... 1,600,000
Selling Shareholders ............................................. 460,635
Equity Securities to be outstanding after offering (assuming complete exercise
of A and B Warrants):
o common.......................................................37,450,474
o preferred.................................................... -0-
o options...................................................... 160,000
o warrants..................................................... -0-
The number of shares being registered is our good faith assumption, that
all Warrant holders will exercise due to the price of our Common stock during
the weeks immediately preceding the filing of this Registration Statement. The
number of common shares outstanding following the Offering does not include
160,000 options to purchase 160,000 common shares. The options were issued in
connection with Employment Agreements; the exercise price of the options range
from $1.00 to $5.00 per share.
1.3 USE OF PROCEEDS. Assuming the exercise of all A (at $1.00) and B warrants,
we would have about $9,541,558 million in net proceeds. We plan to use the net
proceeds for general corporate purposes and working capital.
-7-
<PAGE>
1.4 RISK FACTORS.
Investment in our stock should be considered highly speculative,
start-up and largely unproven. There are non-arms length transactions involving
conflicts of interest between us and our affiliates. Purchasers of the shares of
common stock upon the exercise of the warrants will incur immediate and
substantial dilution in the net tangible book value of the shares and the price
at which our securities are being offered to the public. We have arbitrarily
determined the warrant exercise price. We will incur substantial offering
expenses in connection with this offering and we do not anticipate paying any
dividends on our Common Stock.
1.5 SELECTED FINANCIAL INFORMATION.
The selected financial data presented below has been derived from our
financial statements, which have been examined by Williams & Webster, Certified
Public Accountants, as indicated in their report found at the end of the
prospectus. You should read the information in conjunction with all other
financial information and analysis in this prospectus. Please don't assume that
the results below indicate results we'll achieve in the future, that we will
ever have material revenues or that our operations will be profitable.
<TABLE>
<CAPTION>
Balance Sheet Data
1997[1] 1998[1] 1999[1]
----------- ----------- -----------
<S> <C> <C> <C>
Current Assets .................................. $ 9,540 $ 7,666 $ 139,295
Total Assets .................................... 14,776 11,906 1,467,496
Current Liabilities ............................. 200 97,232 269,553
Long-term debt .................................. -0- -0- 201,917
Stockholders' Equity (deficit) [2] .............. 14,576 (85,326) 996,026
Total Liabilities
& Stockholders' Equity ....................... 14,776 11,906 1,467,496
Net Tangible Book Value Per Share [3] ........... Nil Nil Nil
Statement of Operations
1997 1998 1999
----------- ----------- -----------
Revenues ........................................ $ -0- $ -0- $ 263,338
Cost of Revenues ................................ -0- -0- 129,311
Operating Expenses .............................. 53,324 99,902 273,662
Net Income (Loss) ............................... (53,324) (99,902) (139,635)
Net Income (Loss) per share[3] .................. Nil Nil Nil
Balance Sheet Data:
Working Capital (deficit) ..................... $ 9,340 $ (89,566) $ (130,258)
Total Assets .................................. 14,776 11,906 1,467,496
Long-term Debt ................................ -0- -0- 201,917
Stockholders' equity (deficit) ................ 14,576 (85,326) 996,026
</TABLE>
[1] Includes the financial information of Nexland LP, the predecessor
organization until November 15, 1999. From August 1997 to November 15, 1999, all
of the operations were conducted through Nexland LP. Nexland Fla. was dormant
during that period.
[2] For 1997 and 1998, Stockholder's Equity is actually partners capital of
Nexland LP and the equity of Nexland Fla.
[3] In the acquisition of Nexland LP and Nexland Fla., the allocated 29,500,000
shares for the interests of the partners in the partnership and the original
shares by Nexland Fla., are used as the net stock outstanding. For 1997 and
1998, these shares are considered as outstanding for purposes of comparison.
-8-
<PAGE>
2. RISK FACTORS
The Securities being offered involve a high degree of risk and, therefore
you should carefully consider, among other factors, the following risks:
2.1. OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR AN INVESTOR TO
EVALUATE OUR BUSINESS AND PROSPECTS.
Nexland was incorporated in December 1997 and has minimal business
history that investors can analyze to help them decide whether or not to invest
in us. We first began shipping products commercially in 1999. Any investment in
us should be considered a high-risk investment because investors will be placing
their funds at risk in an unseasoned development stage company with unforeseen
costs, expenses and problems often experienced by development stage companies.
There can be no assurance that we will be able to achieve profitability in the
future and, if achieved, sustain such profitability. We anticipate that
marketing and selling our line of products as contemplated herein will require
substantial expenditures; i.e., public relations, outside sales associates,
hiring of a chief financial officer, etc. The likelihood of our success must be
considered in light of the problems, expenses, difficulties, complications and
delays frequently encountered in connection with a new business, and the
competitive and regulatory environment in which we operate.
2.2 WE HAVE HAD HISTORY OF LIMITED REVENUES THIS MAY CONTINUE TO BE THE CASE.
From the reverse acquisition of November 17, 1999 to December 31, 1999,
we generated operating revenues of approximately $67,057 and incurred costs of
revenues of $34,175, operating expenses of $64,576 and interest expense of
$1,706. All operating revenues have been achieved by Nexland Fla. At December
31, 1999, we had an accumulated deficit of approximately $33,400 after discounts
and dividends. Even if we do achieve profitability, we cannot assure you that we
can sustain or increase profitability on a quarterly or annual basis in the
future. Furthermore, we currently expect to use the net proceeds of this
offering to increase our sales and marketing expenditures, research and
development expenditures and capital expenditures. We may not generate a
sufficient level of revenue to offset these expenditures or be able to adjust
spending in a timely manner to respond to any unanticipated decline in revenue.
If revenue grows slower than we anticipate, if gross margins do not improve or
if operating expenditures exceed our expectations or cannot be adjusted
accordingly, we may continue to experience significant losses on a quarterly and
annual basis.
2.3 WE HAVE HAD HISTORY OF A LIMITED CUSTOMER BASE AND THIS MAY CONTINUE TO BE
THE CASE.
At present, our customer base consists primarily of Internet service
providers or ISPs, telephone companies or Telcos, and value-added resellers. Our
ability to operate profitably depends on increasing our customer base and
achieving sufficient gross profit margins. We cannot assure
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you that we will be able to increase our customer base or to operate profitably.
If any of our major customers stops or delays its purchase of our products, our
revenue and profitability would be adversely affected. We anticipate that sales
of our products to relatively few customers will continue to account for a
significant portion of our revenue. In 1999, sales to ten customers accounted
for 70% of our revenue. We cannot assure you that our current customers will
continue to place orders with us, that orders by existing customers will
continue at the levels of previous periods or that we will be able to obtain
orders from new customers. Although our financial performance depends on large
orders from a few key customers and resellers we do not have binding commitments
from any of them.
2.4 WE ARE SUBJECT TO ALL OF THE SUBSTANTIAL RISKS INHERENT IN AN INTERNET
BUSINESS, WHICH MAY HARM OUR ABILITY TO OPERATE SUCCESSFULLY .
We are subject to all of the substantial risks inherent in an Internet
related business, any one of which may harm our ability to operate successfully.
These include, but are not limited to:
o Our inability to attract or retain customers.
o Our failure to anticipate and adapt to a developing market
o Our inability to upgrade and develop competitive products.
o Technical difficulties with product development.
2.5 IF WE CANNOT MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS COULD BE HARMED.
We are currently experiencing a period of significant growth. As part
of this growth, we will have to:
o Implement new operational procedures and controls.
o Train and manage our employees.
o Expand and coordinate our operations
o Hire additional staff.
o Expand existing offices and open new offices.
If we cannot manage the growth of our network, staff, offices, and
business and coordinate the activities of our technical, accounting, finance,
marketing, and sales staff effectively, we will:
o Commit funds that may not produce revenue.
o Increase our operational overhead.
o Expend management time and effort on operations that may not
succeed.
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2.6 IF WE CANNOT INTEGRATE NEW BUSINESSES, OPERATIONS, TECHNOLOGY, AND PERSONNEL
OUR GROWTH AND OUR BUSINESS COULD BE HARMED.
If we acquire new businesses, we will need to integrate new operations,
technologies and personnel. Acquisitions and business combinations entail
numerous operational risks, including:
o Difficulty in the assimilation of acquired operations,
technologies or products.
o Diversion of management's attention from other business
operations.
o Risks of entering markets in which we have limited or no
experience.
o Potential loss of key employees of acquired businesses.
2.7 IF WE RAISE ADDITIONAL CAPITAL THROUGH THE ISSUANCE OF EQUITY OR CONVERTIBLE
DEBT, YOUR PROPORTIONATE INTEREST WILL BE DILUTED.
We are dependent on the success of this offering to implement our
business plan. If it is not successful we will need more working capital to
expand our operations. If we raise additional capital by issuing equity or
convertible debt securities, the percentage ownership of our then-current
stockholders will be reduced, and such securities may have senior rights,
preferences, or privileges.
2.8 WE MAY NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON THE MOST FAVORABLE TERMS
We may not be able to obtain financing on favorable terms, or at all,
which will limit our ability to:
o Expand.
o Take advantage of unanticipated opportunities, develop or
enhance services.
o Otherwise respond to competitive pressures.
This limitation could harm our business and decrease the value of the
shares or cause us to go out of business. If we are unable to continue our
operations, your entire investment in us will be lost. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a discussion of our working
capital and capital expenditures.
2.9 WE COULD LOSE REVENUES AND OUR REPUTATION MAY BE DAMAGED IF OUR SYSTEMS OR
THOSE OF OUR CUSTOMERS OR OUR SUPPLIERS ARE NOT YEAR 2000 COMPLIANT.
We established a program during 1999 to ensure that, to the extent
reasonably possible, all systems are Year 2000 compliant. Since the beginning of
the new millennium we have experienced no problems related to Y2K. Although
there continues to be inherent uncertainty in the Year 2000
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issue, based on the results of our Y2K program, we do not believe that the Year
2000 issues will have a material effect on our internal network, computer
systems, or operations.
Our customers are dependent on a number of third party network service
providers. At present, we are not aware, nor have we experienced, any third
party Year 2000 issues that are likely to result in any disruption of our
services. The failure of third party network service providers to properly
correct a Year 2000 problem could result in the interruption or failure of their
normal business activities or operations.
2.10 YOU MAY NOT BE ABLE TO RESELL SHARES OF OUR STOCK AT OR FOR MORE THAN THE
PRICE YOU PAID.
The price of our common stock and Internet and telecommunication stock
in general, have recently experienced extreme volatility that often has been
unrelated to the operating performance of any specific public companies. During
the period from December 23, 1999 to March 24, 2000, the bid and ask price of
our common stock has ranged from a high of $8.00 to a low of $4.00. If
continued, these broad market and industry fluctuations may adversely affect the
trading price of our common stock, regardless of our actual operating
performance. This volatility may negatively impact the liquidity and value of
your shares.
2.11 THERE IS A POTENTIAL LACK OF LIQUIDITY FOR COMMON STOCK
Our common stock trades on the OTC Electronic Bulletin Board. Stocks
trading on the OTC Electronic Bulletin Board generally attract a smaller number
of market makers and a less active public market. Moreover, since our common
stock is traded on the OTC Electronic Bulletin Board, investors may find it
difficult to dispose of or obtain accurate quotations as to the value of our
common stock.
2.12 IF WE TRADE BELOW $5.00 PER SHARE WE WILL BE SUBJECT TO PENNY STOCK
REGULATIONS AND RESTRICTIONS
The Securities Exchange Commission has adopted regulations, which
generally define Penny Stocks to be an Equity Security that has a market price
less than $5.00 per share, subject to certain exemptions. As of March 27, 2000,
the closing trade price of our common stock was $6.062 per share, and therefore
is not presently designated as a "penny stock." Such a designation requires any
broker or dealer selling such securities to disclose certain information
concerning the transaction, obtain a written agreement from the purchaser, and
determine that the purchaser is reasonably suitable to purchase such securities.
These rules will restrict the ability of Broker / Dealers to sell our common
stock and may affect the ability of Investors to sell their shares.
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2.13 WE HAVE A SUBSTANTIAL AMOUNT OF STOCK THAT WILL BECOME AVAILABLE FOR RESALE
UNDER RULE 144, WHICH MAY HAVE AN ADVERSE EFFECT ON THE MARKET AND OUR ABILITY
TO OBTAIN EQUITY FINANCING
We have issued and outstanding prior to this offering 34,308,916 shares
of common stock of which 33,636,950 shares are "restricted securities" as that
term is defined under Rule 144 promulgated under the Securities Act. 460,635 of
the restricted securities will be registered in this offering and immediately
available for resale. Future sales of the remaining restricted shares may be
made under Rule 144. Such sales may have an adverse effect on the then
prevailing market price of the common stock, adversely affect our ability to
obtain future financing in the capital markets, and may create a potential
market overhang.
2.14 OUR ARTICLES OF INCORPORATION ALLOW AUTHORIZATION AND DISCRETIONARY
ISSUANCE OF BLANK CHECK PREFERRED STOCK WHICH COULD DELAY, DETER, OR PREVENT A
TAKE OVER, MERGER OR CHANGE OF CONTROL AND MAY PREVENT YOU FROM REALIZING A
PREMIUM RETURN
Our Articles of Incorporation authorize the issuance of "blank check,"
preferred stock. The board of directors is empowered, without stockholder
approval, to designate and issue additional series of preferred stock with
dividend, liquidation, conversion, voting or other rights, including the right
to issue convertible securities with no limitations on conversion. These
designations and issuances, could:
o Adversely affect the voting power or other rights of the
holders of our common stock.
o Substantially dilute the common shareholder's interest.
o Depress the price of our common stock.
o delay, deter, or prevent a merger, take over or change in
control without any action by the shareholders.
2.15 OUR BUSINESS PLAN CONTEMPLATES FUTURE INTERNATIONAL OPERATIONS BUT THERE
ARE NUMEROUS RISKS AND UNCERTAINTIES IN OFFERING SERVICES OUTSIDE OF THE UNITED
STATES.
We intend to expand into international markets. We currently have a
technology sharing business relationship with Nexland France, which precludes us
from marketing in Europe, subject to our exercising an option to acquire that
company. We cannot be sure that we will be able to successfully sell our
services or adequately maintain operations outside North or South America. In
addition, there are certain risks inherent in conducting business
internationally. These include:
o Unexpected changes in regulatory requirements.
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o Ability to secure and maintain the necessary physical and
telecommunications infrastructure.
o Challenges in staffing and managing foreign operations.
o Employment laws and practices in foreign countries.
Any of these could adversely affect our proposed international
operations. Furthermore, some foreign governments have enforced laws and
regulations on content distributed over the Internet that are more restrictive
than those currently in place in the United States. Our manufacturing is
performed by companies located in Taiwan. The current political tension between
Taiwan and mainland China, may impair our ability to import product from our
manufacturers. Any one or more of these factors could adversely affect our
contemplated future international operations, and consequently, our business.
2.16 WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR TO CONTINUE
USING INTELLECTUAL PROPERTY THAT WE LICENSE FROM OTHERS; WE MAY ALSO BE THE
SUBJECT OF INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.
We rely and intend to rely on a combination of patents pending,
copyright, trademark, service mark, and trade secret laws and contractual
restrictions to establish and protect certain of our proprietary rights. We have
a patent pending for certain technology which is included in our family of
Internet Sharing products. There can be no assurance that we will be able to
obtain such protection. Despite our efforts to protect our proprietary rights,
we cannot assure you that unauthorized parties will not copy or otherwise obtain
and use our data or technology or will not independently develop similar or
competing technology. We cannot assure you that these precautions will prevent
misappropriation or infringement of our intellectual property. Monitoring
unauthorized use of our products is difficult, and we cannot assure you that the
steps we have taken will prevent misappropriation of our technology or
intellectual property, particularly in foreign countries where the laws may not
protect our proprietary rights as fully as in the United States.
Our industry is characterized by the existence of a large number of
patents and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the data
communications and networking markets have extensive patent portfolios with
respect to modem and networking technology. From time to time, third parties,
including these leading companies, have asserted and may assert exclusive
patent, copyright, trademark and other intellectual property rights to
technologies and related standards that are important to us. We expect that we
may increasingly be subject to infringement claims as the numbers of products
and competitors in the office market for shared Internet access solutions grow
and the functionality of products overlaps. As of the date of this prospectus,
we have not been the recipient of any such claims.
We may in the future initiate claims or litigation against third
parties for infringement of our proprietary rights to determine the scope and
validity of our proprietary rights. Any such claims, with or without merit,
could be time-consuming, result in costly litigation and diversion of technical
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and management personnel, or require us to develop non-infringing technology
or enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all. In
the event of a successful claim of infringement and our failure or inability to
develop non-infringing technology or license the proprietary rights on a timely
basis, our business would be harmed.
2.17 BECAUSE OF THE UNCERTAINTY ASSOCIATED WITH UNPROVEN BUSINESS MODELS, WE MAY
BE UNABLE TO ACHIEVE WIDESPREAD MARKET ACCEPTANCE
Since our business model is relatively new and unproven, we may not be
able to anticipate and adapt to a developing market. In addition, our success
will depend upon the widespread commercial acceptance of shared Internet access
products by offices. Businesses have only recently begun to deploy shared
Internet access products, and the market for these products is not fully
developed. If the single Internet access devices, such as Integrated Services
Digital Network or ISDN, xDSL and cable modems, currently utilized by many
offices are deemed sufficient even though they do not enable shared access, then
the market acceptance of our products may be slower than expected. Potential
users of our products may have concerns regarding the security, reliability,
cost, ease of use and capability of our products. We cannot accurately predict
the future growth rate or the ultimate size of the office or home markets.
2.18 WE CANNOT BE CERTAIN THAT WE WILL BE ABLE TO COMPETE WITH SIGNIFICANT
PRICING PRESSURE BY OUR COMPETITORS.
As a result of increased competition in our industry, we expect to
encounter significant pricing pressure. We cannot be certain that we will be
able to offset the effects of any required price reductions through an increase
in the number of our customers, higher revenues from our business services, cost
reductions or otherwise, or that we will have the resources to continue to
compete successfully.
2.19 OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE LOSE MARKET SHARE
We compete in a new, rapidly evolving and highly competitive market. We
expect competition to persist and intensify in the future. Our current and
potential competitors offer a variety of competitive products, including shared
Internet access devices such as the products offered by RAMP Networks,
Flowpoint, Intel, Netopia, Sonicwall, Linksys, Cayman Systems and others, and
high-end networking equipment such as routers and switches offered by companies
such as 3Com and Nortel.
Many of our competitors are substantially larger than we are and have
significantly greater financial, sales, marketing, technical, manufacturing and
other resources and more established distribution channels. These competitors
may be able to respond more rapidly to new or emerging technologies and changes
in customer requirements or devote greater resources to the development,
promotion and sale of their products than we can. Furthermore, some of our
competitors may make
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strategic acquisitions or establish cooperative relationships among themselves
or with third parties to increase their ability to rapidly gain market share by
addressing the needs of our prospective customers. These competitors may enter
our existing or future markets with solutions that may be less expensive,
provide higher performance or additional features or be introduced earlier than
our solutions. Given the market opportunity in the shared Internet access
market, we also expect that other companies may enter our market with better
products and technologies. If any technology that is competing with ours is more
reliable, faster, and less expensive or has other advantages over our
technology, then the demand for our products and services would decrease, which
would seriously harm our business.
We expect our competitors to continue to improve the performance of
their current products and introduce new products or new technologies as
industry standards and customer requirements evolve that may supplant or provide
lower cost alternatives to our products. To be competitive, we must continue to
invest significant resources in research and development, sales and marketing
and customer support.
Increased competition is likely to result in price reductions, reduced
gross margins, longer sales cycles, and loss of market share, any of which would
seriously harm our business and results of operations.
The market for shared Internet access solutions is characterized by
rapidly changing technologies and short product life cycles. Our future success
will depend in large part upon our ability to:
o identify and respond to emerging technological trends in the
market;
o develop and maintain competitive products;
o enhance our products by adding innovative features that
differentiate our products from those of our competitors;
o bring products to market on a timely basis at competitive
prices;
o respond effectively to new technological changes or new
product announcements by others; and
o respond to emerging broadband access technologies such as
xDSL, cable, wireless and other emerging broadband
technologies.
The technical innovations required for us to remain competitive are
inherently complex, require long development cycles, and are dependent in some
cases on sole source suppliers. We will be required to continue to invest in
research and development in order to attempt to maintain and enhance our
existing technologies and products, but we may not have the funds available to
do so. Even if we have sufficient funds, these investments may not serve the
needs of customers or be compatible with changing technological requirements or
standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced products can be
ascertained. Revenue from future products or product enhancements may not be
sufficient to recover the associated development costs.
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2.20 WE HAVE LIMITED MARKETING AND SALES CAPABILITY.
Because of our limited working capital in the past, we have not had the
resources to fully implement our marketing and sales strategy. In order to
increase our revenues, we are in the process of further implementing a marketing
and sales force with technical expertise and marketing capability. There can be
no assurance that we will be able to:
o Establish such a sales force.
o Gain market acceptance for our products.
o Develop our sales force.
o Obtain and retain qualified sales personnel on acceptable
terms.
o Meet our proposed marketing schedules or plans.
To the extent that we arrange with third parties to market our
services, the success of such products may depend on the efforts of such third
parties.
2.21. THE LOSS OF THE SERVICES OF EXISTING PERSONNEL AS WELL AS THE FAILURE TO
RECRUIT KEY TECHNICAL AND MANAGEMENT PERSONNEL WOULD BE DETRIMENTAL AND COULD
HAVE AN ADVERSE IMPACT UPON OUR BUSINESS AFFAIRS AND FINANCES
Due to the specialized nature of our business, we are highly dependent
upon our ability to attract and retain qualified technical and managerial
personnel. Therefore we have entered into employment and consulting agreements
with certain of our executive officers. We have also engaged Nexland France to
consult regarding our technology and research and development. Nexland France
has agreed to provide the services of their entire research and development
department including Israel Daniel Sultan. The loss of the services of existing
personnel, especially Mr. Levine our President/Chief Executive Officer and
Nexland France, as well as the failure to recruit key technical and managerial
personnel in a timely manner would be detrimental and could have an adverse
impact upon our business affairs or finances.
Our anticipated growth and expansion into areas and activities
requiring additional expertise, such as marketing, will require the addition of
new management personnel. Competition for qualified personnel is intense and
there can be no assurance that we will be able to attract and retain qualified
personnel necessary for the development of our business.
We cannot assure you that we will be able to effectively manage the
expansion of our operations, that our systems, procedures or controls will be
adequate to support our operations or that the executive management team will
be able to achieve the rapid execution necessary to fully exploit the market
opportunity for our products and services.
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2.22 OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS, TOGETHER, MAY
BE ABLE TO EFFECTIVELY EXERCISE CONTROL OVER ALL MATTERS SUBMITTED TO A VOTE OF
STOCKHOLDERS
Our executive officers, directors, and principal stockholders
beneficially own, in the aggregate, approximately 81.2% of our outstanding
shares of common stock. These stockholders, if acting together, will be able to
effectively control most matters requiring approval by our stockholders,
including the election of our Directors. These shareholders can designate the
members of our Board of Directors and can decide our operations and business
strategy. You may disagree with these shareholders decisions. Even if you do not
like our Directors, you will not be able to remove them from office.
Additionally, such persons would be able to influence significantly a proposed
amendment to our charter, a merger proposal, a proposed sale of assets or other
major corporate transaction or a non-negotiated takeover attempt. Their
influence may not be beneficial to you. If they prevent or delay a merger or
takeover, you may not realize the premium return that stockholders may realize
in conjunction with corporate takeovers. Moreover, there are no preemptive
rights in connection with our Common Stock. Finally, cumulative voting in the
election of Directors is not provided for. Accordingly, the holders of a
majority of the shares of Common Stock, present in person or by proxy, will be
able to elect all of our Directors.
2.23 WE HAVE NOT PAID NOR DO WE EXPECT TO PAY DIVIDENDS IN THE NEAR FUTURE
It is not anticipated that we will pay any dividends on our common
stock in the future. The Board of Directors intends to follow a policy of
retaining earnings, if any, for use in our business operations. As a result, the
return on your investment in us will depend upon any appreciation in the market
price of the common stock.
2.24 THE INSIDE SHAREHOLDERS RECEIVED SHARES FOR LESS CONSIDERATION THAN YOU
ARE ASKED TO PAY
The number of shares of Common Stock issued to our present shareholders
for cash and property was arbitrarily determined and was not the product of
arm's length transactions. The inside shareholders received shares for $0.1223
to $0.0104 per share, which is substantially less than you are asked to pay.
2.25 THE OFFICERS AND DIRECTORS MAY BE ENTITLED TO INDEMNIFICATION FOR
SECURITIES LIABILITIES BY THE COMPANY RESULTING IN SUBSTANTIAL EXPENDITURES FOR
US AND PREVENTING ANY RECOVERY FROM OFFICERS AND DIRECTORS
Our Articles of Incorporation provide that we may indemnify any
Director, Officer, agent, and/or employee as to those liabilities and on those
terms and conditions as are specified in the Arizona Business Corporation Act.
Further, we may purchase and maintain insurance on behalf of any such persons
whether or not the corporation would have the power to indemnify such person
against the liability insured against. The foregoing could result in substantial
expenditures by us and
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prevent any recovery from such Officers, Directors, agents, and employees for
losses incurred by us as a result of their actions. Further, we have been
advised that in the opinion of the Securities and Exchange Commission,
indemnification is against public policy as expressed in the Securities Act of
1933, as amended, and is, therefore, unenforceable.
2.26 WE HAVE EXPERIENCED NEGATIVE CASH FLOW WHICH COULD RESULT IN OUR INABILITY
TO FUND PROGRAMS AND CREATE A NEED FOR ADDITIONAL FINANCING
Since inception, we have experienced negative cash flow from operations
and we expect to continue to experience negative cash flow from operations for
the foreseeable future. Therefore, we have relied solely on limited revenues,
shareholder loans and, by this offering, the issuances of equity securities, to
fund our operations. If this offering is not successful, we may need to raise
additional funds prior to the expiration of such period. In particular, we may
need to raise additional funds, especially if our estimates of revenue, working
capital and/or capital expenditure requirements change or prove inaccurate or in
order for us to respond to unforseen technological or marketing hurdles or to
take advantage of unanticipated opportunities. We cannot be certain that
additional financing, through the issuance of equity securities or otherwise,
will be available to us on favorable terms when required, or at all. If adequate
funds are not available, or are not available on acceptable terms, we may not be
able to take advantage of market opportunities, develop new products or
otherwise respond to competitive pressures which could adversely affect our
ability to achieve and sustain positive cash flow and profitability in the
future.
2.27 WE DEPEND ON CONTRACT MANUFACTURERS FOR SUBSTANTIALLY ALL OF OUR
MANUFACTURING REQUIREMENTS. THE INABILITY OF OUR CONTRACT MANUFACTURERS TO
PROVIDE US WITH ADEQUATE SUPPLIES OF HIGH QUALITY PRODUCTS OR THE LOSS OF ANY OF
OUR CONTRACT MANUFACTURERS WOULD CAUSE A DELAY IN OUR ABILITY TO FULFILL ORDERS
WHILE WE OBTAIN A REPLACEMENT MANUFACTURER
We have developed a highly outsourced contract manufacturing capability
for the production of our products. Our primary relationship with our contract
manufacturers has been accomplished through our Hong Kong agent located in
Taiwan, owned by affiliates, with whom we have entered into a Cooperation
Agreement. We rely on contract manufacturers to procure components, assemble,
test and package our products. While we believe there are alternative
manufacturing companies available at competitive prices, any interruption in the
operations of one or more of these contract manufacturers or delays in their
shipment of products would adversely affect our ability to meet scheduled
product deliveries to our customers.
We intend to regularly introduce new products and product enhancements
that will require that we rapidly achieve volume production by coordinating our
efforts with those of our suppliers and contract manufacturers. The inability of
our contract manufacturers to provide us with adequate supplies of high quality
products or the loss of any of our contract manufacturers would cause a delay in
our ability to fulfill orders while we obtain a replacement manufacturer. In
addition, our
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inability to accurately forecast the actual demand for our products could result
in supply, manufacturing or testing capacity constraints. These constraints
could result in delays in the delivery of our products or the loss of existing
or potential customers.
Although we perform random spot testing on manufactured products, we
rely on our contract manufacturers for assembly and primary testing of our
products. Any product shortages or quality assurance problems could increase the
costs of manufacturing, assembling or testing our products.
2.28 IF WE FAIL TO DEVELOP AND EXPAND OUR DISTRIBUTION CHANNELS OUR BUSINESS
WILL SUFFER
Our product distribution strategy focuses primarily on continuing to
develop and expand our distribution channels through ISPs, value-added
resellers, and Telcos. If we fail to develop and cultivate relationships with
these customers, or if they are not successful in their sales efforts, our
product sales may decrease and our operating results may suffer. Many of our
resellers also sell products that compete with our products. We cannot assure
you that our customers will market our products effectively or continue to
devote the resources necessary to provide us with effective sales, marketing and
technical support.
2.29 OUR FINANCIAL RESULTS MAY PERIODICALLY VARY DUE TO FACTORS WHICH MAY
AFFECT OUR STOCK
In some future financial reporting periods our operating results may
vary due to factors unrelated to the progress of our business and beyond our
control. Should these fluctuations be below the expectations of public market
analysts and investors, the price of our common stock may fall. These factors
include:
o continued market acceptance of our products;
o fluctuations in demand for our products and services;
o variations in the timing of orders and shipments of our
products;
o the timing of new product and service introductions by us or
our competitors;
o our ability to obtain sufficient supplies of sole or limited
source components for our products;
o unfavorable changes in the prices of the components we
purchase;
o our ability to attain and maintain production volumes and
quality levels for our products; and
o our ability to integrate new technologies we develop or
acquire into our products.
The amount and timing of our operating expenses generally will vary
from quarter to quarter depending on the level of actual and anticipated
business activities. Research and development expenses will vary as we develop
new products. General and administrative expense fluctuations in past periods
have been due primarily to the level of sales and marketing expenses associated
with new product introductions. In the past, we have experienced fluctuations in
operating results.
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Supply, manufacturing or testing constraints could result in
delays in the delivery of our products. Any delay in the product deployment
schedule of one or more of our products would likely adversely affect our
operating results for a particular period.
2.30 WE WILL HAVE BROAD DISCRETION TO USE THE PROCEEDS FROM THIS OFFERING IN A
WAY YOU MAY DISAGREE
Of the estimated net proceeds from this offering of approximately
$9,000,000, a substantial portion will be used for general corporate purposes
and has not yet been designated for a particular purpose. Our management can
therefore spend the proceeds from this offering in ways with which our
stockholders may not agree.
3. FORWARD LOOKING STATEMENTS
This prospectus contains statements that plan for or anticipate the
future. Forward-looking statements include statements about the future of the
internet industry, the future of our products in that industry, statements about
our future plans and strategies, and most other statements not historical in
nature. They are based on assumptions that may or may not prove to be accurate
and such projected results should not be relied upon as indicative of the actual
results that may be obtained by us. No representation or warranty of any kind is
given with respect to the accuracy of such projections or the underlying
assumptions. Such projections have been prepared by and are the sole
responsibility of our management and have not been reviewed or compiled by
independent auditors.
Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "continue,"
"estimate," or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition, or state other "forward-looking" information.
Examples of forward-looking statements include discussions relating to:
o Plans to expand our existing operations.
o Plans to enter the international market.
o Introductions of new products and services.
o Estimates of market sizes and addressable markets for our
services and products.
o Anticipated revenues from designated markets during 2000 and
later years.
o Statements regarding the Year 2000 issue.
Because forward-looking statements involve future risks and
uncertainties, there are factors that could cause actual results to differ
materially from those expressed or implied. For example, a few of the
uncertainties that could effect the accuracy of forward-looking statements,
besides the specific factors identified in Section 2, include:
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<PAGE>
o Changes in our business strategies
o Changes in the level of demand for our products
o Technical developments which make our products obsolete
o Changes in general economic and business conditions affecting
the internet industry
4. USE OF PROCEEDS
We currently expect to use the net proceeds primarily for working
capital and general corporate purposes, including increased sales and marketing
expenditures, increased research and development expenditures and capital
expenditures made in the ordinary course of business. In addition, we may use a
portion of the net proceeds for further development of our product lines through
acquisitions of products, technologies and businesses. We have an option to
purchase Nexland France, but no requirement to do so. We will not receive any
proceeds from the offering by the Selling Shareholders.
Although there is no basis for determining how many Warrants will be
exercised, the following table, in order of priority, shows how possible
proceeds would be applied over the next 12 months assuming 100% of the A
Warrants are exercised and then, 100% of the A and B Warrants combined:
<TABLE>
<CAPTION>
Purpose AWarrants A & B Warrants
<S> <C> <C>
o Research & Development $ 120,000 $ 570,000
o Sales & Marketing1/ 304,000 304,000
o Operating and Administrative
Expenses2/ 84,000 244,000
o Salaries - Officers3/ 420,000 420,000
o Other Salaries4/ 510,000 510,000
o Leasehold Payments 72,000 72,000
o Working Capital5/ 31,558 7,421,558
Total $1,541,558 $9,541,558
</TABLE>
- ----------------------------------
1/ This allocation will include the cost of conventions, seminars trade shows,
direct mail postage and advertising.
2/ This allocation is intended to meet the general office, clerical and
administrative expenses of the Company's operations, including administrative
salaries and Director's and Officer's insurance.
3/ This allocation is intended to provide for payment of the president, CEO, and
CFO salaries.
4/ This allocation is intended to provide for salaries for technical and sales
personnel.
5/ This allocation is intended to supply general working capital for the Company
to use in connection with its commercial operations and to meet unexpected
contingencies. We may also draw upon this fund in the event the Company decides
to exercise its option to purchase Nexland France.
The amounts set forth above are only estimates. We are unable to
predict precisely what amounts, if any, will be received from the exercise of
the Warrants and, consequently, cannot accurately predict what amounts will be
used for each purpose. The actual expenditures may vary
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<PAGE>
from the estimates set forth in the table above, depending upon a number of
factors beyond our control. It is anticipated that a sufficient reserve has been
allocated to "Working Capital" to provide adequate additional funds, without
affecting the allocations set forth in other categories. To the extent amounts
received are inadequate in any particular area of expenditure, supplemental
amounts may be drawn from operating revenues, if any, or from the allocation for
"Working Capital." Conversely, in the event that actual expenditures in any
particular category are less than the amounts allocated, any amounts not
expended will be added to the reserve for "Working Capital." At present, we do
not have adequate cash on hand or other resources in order to fully implement
our business plan. At least $2,000,000 in proceeds from the exercise of Warrants
is required by us for our first year of operation.
Depending upon the success of our operations, prevailing market
conditions affecting the future prospects of our business, and the availability
of new or expanded business opportunities, we may seek funding for future
expansion. Pending the utilization of the net proceeds of this offering, the
available funds will be invested temporarily in government securities, bank
certificates of deposit, and other bank money market instruments.
5. DILUTION
As of March 21, 2000, the Company had 34,308,916 shares of Common Stock
outstanding with no net tangible book value per share. We had a net deficit of
$365,454.63 as of our most recent financial statements dated December 31, 1999
at $1.00 per share. This net deficit was reduced by $160,000 in March, 2000, by
the exercise of common stock options at $1.00 per share in cash.
Assuming the exercise of all Class A Warrants (1,541,588 at $1.00 per
share) and assuming no other changes to the Company's financial position, the
net tangible book value of the Company would be $1,377,368 or approximately
$0.04 per share. This represents an immediate dilution of $0.96 per share to new
investors and an immediate increase in the net tangible book value of shares
held by present shareholders of $0.04 per share.
Assuming the exercise of all Class B Warrants (1,600,000 at $5.00 per
share) and assuming no other changes to the Company's financial position, the
net tangible book value of the Company would be $7,835,780 or approximately
$0.22 per share. This represents an immediate dilution of $4.78 per share to new
investors and an immediate increase in the net tangible book value of shares
held by present shareholders of $0.22 per share.
"Net tangible book value" is the amount that results from subtracting
the total liabilities, deferred costs, and intangible assets of the Company from
its total assets. "Dilution" is the difference between the public offering price
and the net tangible book value of the shares immediately after the offering.
Additionally, dilution is calculated based on book value of the Company's
assets, which may not necessarily reflect the actual market value of such
assets.
The following table illustrates the per share dilution
-23-
<PAGE>
<TABLE>
<CAPTION>
Assuming
Assuming Exercise Assuming Exercise Exercise of
of all Class A Warrants [3] of all Class B Warrants [3] all Class A and B Warrants[3]
--------------------------- --------------------------- -----------------------------
<S> <C> <C> <C>
Exercise price
per Warrant [1] . . $1.00 $5.00 $3.04
Net tangible book value
per share before
offering [2] . . . 0.00 0.00 0.00
Increase per share
attributable to
existing investors. . 0.04 0.22 0.25
Net tangible book
value per share
after offering . . 0.04 0.22 0.25
Dilution of net
tangible book
value per share to
new investors . . $0.96 $4.78 $2.79
</TABLE>
[1] Exercise price before deduction of offering expenses.
[2] Determined by dividing the number of shares of Common Stock outstanding
into the net tangible book value of the Company.
[3] All calculations are on a per share basis.
6. CAPITALIZATION
The following table shows our capitalization as of March 21, 2000, as
adjusted to reflect the exercise of no Warrants, all Class A Warrants and all
Class B Warrants. This table should be reviewed in conjunction with our
financial statements and the notes included elsewhere in this Prospectus. See
"Financial Statements."
-24-
<PAGE>
<TABLE>
<CAPTION>
As Adjusted for As Adjusted for As Adjusted fo
Exercise of all Exercise of all Exercise of all
Class A Warrants Class B Warrants Class A and B
Actual Pro Forma Pro Forma Warrants Pro Forma
------ --------- ------------------ ---------
<S> <C> <C> <C> <C>
Stockholder's Equity:
50,000,000 Common Stock
Authorized
$0.0001 par value;
34,308,916 shares outstanding $ 3,430.89 -- -- --
at Mar. 21, 2000;
35,850,474 shares outstanding
(A Warrants); $ -- 3585.05 -- --
35,908,916 Shares Outstanding
(B Warrants) -- -- 3590.89 --
37,450,474 shares outstanding
(A & B Warrants); 3745.05
Preferred Stock $0.0001 par value, $ -- -- -- --
authorized 10,000,000 shares;
- -0- issued and outstanding
at Mar. 21, 2000
Additional Paid-In Capital[1] $1,518,049.20 3,059,483.04 9,517,889.20 11,059,323.04
Accumulated Deficits [2] $ (365,454.63) (365,454.63) (365,454.63) (365,454.63)
TOTAL STOCKHOLDERS'
EQUITY $1,156,025.46 2,697,613.46 9,156,025.46 10,697,613.46
</TABLE>
[1] Additional paid-in capital includes $1,026,016 as of December 31, 1999 and
$154,984 from the exercise of options and $332,049.20 per stock issued for
services and financing purposes in March 2000.
[2] Accumulated deficit was $33,400, at December 31, 1999, and has been
increased by $332,054.63 for the value of stock issued for services and
financing purposed in March 2000.
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
7.1. OVERVIEW
The following is a discussion of certain factors affecting our results
for the past three fiscal years ending December 31, 1999 and our liquidity and
capital resources. We are a provider of easy-to-use, reliable and affordable
shared Internet access solutions for the home and small office market. Our ISB
family of products allows multiple users in an office or home environment (or
comparable arrangement) to share the same Internet connection simultaneously
while optimizing each user's access speed, and providing a secure firewall. Our
ISB product family is a flexible and scalable platform that provides
firmware-based routing and functionality to deliver Internet-enabled
applications and services. Our products support existing analog phone lines, as
well as ISDN and
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<PAGE>
emerging access technologies such as xDSL and cable modems. Our products enable
multiple users to securely access the Internet simultaneously with complete
firewall security.
We earn revenue primarily from product sales to ISPs, value added
resellers and telephone companies, which in turn resell or provide a premium
service to their customers seeking shared internet access and security. Our
product sales prices range from $199 to $349, depending upon the type of product
each customer selects. Customers generally pay us directly on a 30 day delayed
basis for these products.
From time to time we have also generated revenue from the sale of
traditional networking products.
Our costs and expenses primarily fall into the following categories:
o Cost of Contract Manufacturing;
o Sales and marketing;
o General and administrative;
o Amortization and depreciation.
o Research and Development
We expect these expenses to increase over time to support our growing
customer base. Our operating expenses also include employee salaries and
benefits, equipment costs, office rent and utilities and customer service and
technical support costs. We expect customer service and support expenses to
increase over time to support new and existing subscribers.
Our sales and marketing expenses to date have been minimal due to the
start of our operations. We expect those expenses to increase as we implement
our business plan in the coming year. We anticipate those expenses to include
advertising and commissions and bonuses paid to our sales and marketing
personnel. We also anticipate hiring additional sales and marketing personnel to
assist us in our rapid growth plans.
We plan to look at certain employment agreements currently in place to
determine the need, if any for modification. We also plan to implement our
employee stock compensation/option plan that will attract new employees, retain
current employees, and will not be disproportionate to our income from
operations.
Our general and administrative expenses consist primarily of
administrative staff and related benefits. We expect our general and
administrative costs to increase to support our growth.
Our amortization and depreciation expense primarily relates to our
equipment and is based on the estimated useful lives of the assets ranging from
three to five years using the straight-line method for the equipment.
Depreciation expense is expected to increase as we place in service
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<PAGE>
equipment already purchased and as we acquire additional equipment to support
our intended growth.
7.2. REVERSE SPLIT
Unless otherwise stated, all share and per share information contained
in this prospectus gives retroactive effect to a 1-for-250 reverse split of all
outstanding shares of our common stock.
7.3. RESULTS OF OPERATIONS
The discussion of our historical results set forth below addresses our
historical results of operations and annual conditions as shown on our Financial
Statements for the fiscal year ended December 31, 1999, as compared to the
fiscal year ended December 31, 1998. However, this information is not
necessarily indicative of our operating results since we had no significant
operations until November 17, 1999, when we acquired Nexland Inc. (Florida) in a
reverse acquisition merger, and began our Internet related operations.
Furthermore, for comparison purposes, the information for the predecessor
companies, Nexland LP and Nexland, Inc. (Florida) for 1998 and part of 1999 are
included in the comparable numbers.
For Years Ending December 31, 1999 and 1998:
(1) Revenues. For the years ended December 31, 1999, we had
$263,338 in revenue consisting primarily of product sales.
During 1998, the Company and its predecessors recognized no
revenues and were still developing their products and market.
The increase in customer revenues is primarily due to long
sales cycle and the Company will be adding additional sales
positions to continue the expansion of sales.
(2) Expenses and Net Loss From Operations. Cost of product
sales for the year ended December 31, 1999 was $129,311.
Actual product sales did not begin until January 1999, so
there are no comparable costs of product for 1998.
Advertising expenses for the year ending December 31, 1999
were $10,364 which compares to 3,354 for the same period in
1998. The increase represents the additional advertising used
to promote sales in 1999.
Salary expense increased to $42,302 from $17,091 as compared
to the year ended December 31, 1999 to the year ended December
31, 1998. The increase was due to increased activities of the
Company.
General and administrative expenses consist primarily of
office and equipment rent, costs associated with operating our
offices, such as telephones, utilities and supplies,
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<PAGE>
insurance and professional fees, such as legal, accounting and
consulting. These expenses increased to $201,661 for the year
ended December 31, 1999 as compared to $75,729 for the year
ended December 31, 1998, primarily as a result of our start-up
activities and beginning minimal operations.
Depreciation and amortization for the year ended December 31,
1999 increased to $10,008 from $1,528 for the year ended
December 31, 1998. The increase was due to our placing in
service equipment during the year ended 1999 and the
amortization of intangible assets trademarks acquired as part
of the reverse accounts on November 17, 1999.
(3) Interest expense. For the months ended December 31, 1999
increased to $9,327 from $2,200 for the year ended December
31, 1998 due to the accrual of interest on the note payable to
stockholder.
(4) Income From Operations. These activities resulted in a net
loss for the year ended December 31, 1999 of $33,400 for
Nexland, Inc. and $106,235 for the predecessor Nexland LP.
7.4. LIQUIDITY AND CAPITAL RESOURCES.
(A) Sources of Cash
Since our inception, we have relied principally upon the proceeds of
private equity financings/loans to fund our working capital requirements and
capital expenditures. We have generated only minimal revenues from operations to
date.
Although we cannot accurately predict the precise timing of our future
capital, we estimate that we will need to expend approximately $2,000,000 on new
product, increasing the Company's sales force and additional research and
development. In addition, our present operating costs are approximately $35,000
per month and we expect to have operating costs of approximately $100,000 per
month by the third quarter of 2000.
Upon organization, Windstar sold 1,992,000 shares of our Common Stock
to nineteen persons and two corporations for $44,450 in cash and property. The
cash has been used for organizational matters and initial start-up.
If we are unable to obtain necessary additional capital, we may be
required to change our proposed business plan and decrease our planned
operations, which would have a material adverse effect upon our business,
financial condition, or results of operations.
As part of the employment agreement dated November 11, 1997, the
Company sold Fred R. Schmid, pursuant to a Stock Purchase Agreement, 540,000
shares of Common Stock at a purchase
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<PAGE>
price of $10,000, which has been paid to the Company. The agreement also
provides an option for the purchase of 160,000 shares at an exercise price of
$2.50 per share and 160,000 shares at $5.00 per share for a period of ten years.
On July 29, 1998, the $2.50 option price was reduced to conform to the offer
made to the Class A warrant holders to $1.00 per share to reduce the exercise
price for a specific time period.
The Company must obtain additional capital in order to fully develop
its business plan. The Company intends to raise additional capital through the
exercise of the Class A and Class B Warrants for shares of Common Stock, loans,
and/or to enter into arrangements for such purposes with third parties. There is
no assurance that the Company will be able to raise such additional capital or
that, if available, the terms of such financing will be commercially acceptable
to the Company. The Company has no significant operating history.
The foregoing reflects the 1 for 250 share reverse stock split that
took place on April 15, 1998.
(B) Capital Expenditures. Our net capital additions were $225 in 1999,
for computer equipment. During 2000, the Company anticipates spending $20,000
for a phone system and computers.
8. OUR BUSINESS
8.1. GENERAL
We design and develop easy-to-use, reliable and affordable shared
Internet access solutions for the office and home markets and similar
arrangements. Our product family allows multiple users on a local area network
(LAN) in an office to share the same Internet connection simultaneously while
optimizing each user's access speed and providing firewall security. Our ISB
product family is a flexible and scalable platform that provides firmware-based
routing functionality to deliver Internet-enabled applications and services. Our
products support existing analog phone lines, as well as ISDN and emerging
access technologies such as xDSL, cable modems and wireless connections. Our
products enable multiple users to safely and securely access the Internet
simultaneously through either regular phone lines, analog modems, or highspeed
digital connections. Our products also support VPNs, the passthrough of VPN
protocols(IPSec, L2TP and PPTP). We primarily market and sell our products
through North American and South American based ISPs, value-added resellers, and
Telcos, with some minor sales to direct end-users. As of year-end 1999, we had
relationships with over 100 customers.
8.2. EXPLANATION AND BACKGROUND OF THE INTERNET
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<PAGE>
The Internet is a global collection of interconnected computer networks
that allows commercial organizations, educational institutions, government
agencies, and individuals to communicate electronically, access and share
information, and conduct business. As businesses have begun to use e-mail, file
transfer and area networks, commercial usage has become a major component of
Internet traffic.
In the mid-1990s, Internet service providers began to offer access,
e-mail, customized content and other specialized services, and products aimed at
allowing both commercial and residential customers to obtain information from,
transmit information to, and use resources available on the Internet.
The emergence of the Web, the graphical, multimedia environment of the
Internet, has resulted in the development of the Internet as a new mass
communication medium. The Internet has experienced rapid growth in recent years
as evidenced by the volume of Internet traffic and the numbers of Internet
users, Web sites and Internet-based applications and a proliferation of
Internet-based services, including:
o chat rooms
o online magazines
o news feeds
o interactive games
o educational and entertainment information
o development of online communities
o Virtual Private Networking
This rapid growth is expected to continue as businesses increasingly
use the Internet to access and share information and to interact with a large
number of geographically dispersed consumers and business partners. Furthermore,
an Internet-based economy is emerging as businesses continue to use the Internet
to sell products and services, implement electronic commerce initiatives and
utilize new generations of Internet-enabled business applications.
Participation in this emerging Internet-based economy and realization
of the benefits and efficiencies facilitated by new Internet-enabled business
applications are becoming increasingly important for the office market as well
as the internet service providers and telephone companies which provide internet
service to them. The office market includes small businesses, home offices and
remote offices. The Internet allows businesses to communicate more effectively
with their suppliers and customers and to access and share critical business
information both internally and with their business partners. Overall, the
Internet and the business applications enabled by the Internet present
tremendous opportunities for offices to improve business communications,
collaborate with partners and suppliers, perform important business processes
online and realize cost and operational efficiencies that will position them to
compete more effectively with organizations that have greater resources and
market presence.
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<PAGE>
(A) Internet Access Technologies Facilitate New Applications. Analog
dial-up modems currently represent the most widely utilized method of accessing
the Internet. While many markets worldwide will continue to depend on analog
Internet access technologies, new high-speed and high-bandwidth Internet access
technologies such as xDSL and cable modems have emerged in recent years.
According to TeleChoice, xDSL connections, which utilize the same copper wire
infrastructure that provides telephone service to most residential and business
locations, are projected to grow from approximately 250,000 in 1999 to more than
2.3 million in 2002. Likewise, cable modem service providers and equipment
manufacturers have experienced significant growth in the number of subscribers
and deployments over the past several years. There are approximately 350,000
cable modem subscribers in North America and industry analysts such as Forrester
Research predict there will be more than 2 million cable modem subscribers
during the year 2000. Furthermore, it is predicted by Forrester Research that
25% or 16 million of all online households in the U.S. will have high-speed
connectivity to the Internet by 2002 and 3 million xDSL subscribers by 2001.
(B) The Broadband Market - High Speed Access. At present ISDN is
rapidly becoming available to the United States as a method used to transmit
more data over existing regular phone lines. ISDN is, in most markets, priced
comparably to standard analog phone circuits. It can provide speeds of roughly
128,000 bits per second, although, in practice, most users will be limited to
56,000 or 64,000 bits per second. However, new emerging access technologies
offer greater bandwidth and provide much higher access speeds; they enable a
variety of new data intensive, multimedia and graphical applications, as well as
new integrated voice and high-speed data connectivity services. These broadband
markets include:
o Digital Subscriber Line or xDSL, is a method for moving data
over existing copper phone lines, but at a much faster rate
than a regular phone connection.
o Interactive Cable allows for communication across cable
infrastructure, cable modems, or cable modem termination
centers; also known as headends;
o Wireless Transmissions are movements of packets of information
over airwaves
o Fiber to the Curb exists when fiber optic cable supports an
alternative broadband access.
o Future technology will include high speed access based on
light and photonics that offer nearly unlimited bandwidth
capacity.
As these access technologies become more affordable and widely
available, they will present increasingly attractive alternatives for satisfying
the Internet access requirements of offices. Because of our ethernet to ethernet
interface, all of the aforementioned broadband options can be securely routed
and shared through our family of products.
In addition, the office environment will experience an even greater
need to access the Internet via these emerging technologies as new generations
of business applications emerge that larger competitors can already access
through relatively expensive dedicated high-speed leased lines. Furthermore, the
higher cost of xDSL and cable modem access technologies relative to analog
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<PAGE>
technologies will increase the need of offices for shared Internet access
solutions that enable total implementation costs to be allocated across a
greater number of users.
(C) Today's Small Business Office Internet Access Environment. Access
Media International estimates that in 1998 there were approximately 85 million
small businesses worldwide with fewer than 100 employees that could afford and
benefit from information technology solutions, including approximately 7.2
million small businesses in the United States alone. International Data
Corporation estimates that the percentage of the number of small businesses with
access to the Internet increased from approximately 26% in 1997 to approximately
50% in 1998 and is projected to increase to approximately 65% by 2001.
Worldwide, there is an increasing demand for Broadband access services. The
Internet is becoming increasingly popular to consumers for conducting business
and personal pursuits. Consequently, those same consumers are seeking
high-speed, low-cost solutions, enabling them to benefit from the advances in
data transfer speed. International Data Corporation predicted that by the end of
1999, one in three US households would be online. And businesses have even
greater requirements for high-speed access in order to implement electronic
commerce and/or web based business initiatives.
Despite the large size of the small office market and increasing demand
for viable Internet access solutions, most networking and personal computing
vendors have tailored their product offerings and Internet access solutions for
either the large corporate market or the consumer market.
As a result, there are limited shared Internet access solutions
designed to accommodate the specific needs of the small office market. Small
office Internet access requirements include the following:
o Shared Access. Many small offices have addressed the Internet
access problem by installing a single dedicated computer that
is connected to the Internet via a modem, an analog phone
line, and a single Internet service account shared by all
users in the office. This approach is inefficient in that it
requires users to wait in line until the Internet terminal
becomes available. In addition, productivity is often reduced
since many users fail to utilize the Internet because it is
not conveniently accessible from their individual workplaces.
As an alternative, some small offices have added additional
modems, analog phone lines and Internet service accounts for
each employee requiring Internet access. However, maintaining
separate Internet connections for each user is costly and
difficult to manage. Moreover, neither of these solutions
enable shared Internet access among multiple users, which is
critical to achieving cost efficiencies and benefitting from
the information sharing, communications and operational
advantages offered by the Internet and Internet-enabled
business applications.
o Ease of Installation and Use. Most small offices lack in-house
information technology personnel as well as sufficient
resources to hire outside system integration consultants to
implement and maintain complex Internet access solutions.
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<PAGE>
Therefore, small offices require Internet access solutions
that are easy to install, use, maintain and upgrade.
o Affordability. Small offices are often subject to tight
budgetary constraints. Therefore, the server-based and
router-based local area networking solutions that have been
widely adopted by larger organizations to accommodate shared
access often are prohibitively expensive for small offices.
o Scalability and Compatibility. Small offices need Internet
access solutions that accommodate their current requirements
and can be scaled to accommodate additional users as their
businesses grow. In addition, small offices seek solutions
that meet these needs without having to replace existing
systems, invest significant capital in upgrades or employ
in-house information technology personnel. Further, most small
offices have already made significant investments in computer
hardware, modems, and software, and in many cases utilize
widely available analog access technologies. As a result,
small offices require Internet access solutions that are
compatible with existing hardware and software and flexible
enough to support analog access technologies, as well as ISDN
and emerging high-speed access technologies such as xDSL and
cable modems.
o Platform for New Applications and Services. Small offices also
seek Internet access solutions that serve as a platform for
the deployment of new applications and services enabled by the
Internet and the emergence of high-speed access technologies.
(D) The Small Office Market Opportunity for Shared Internet Access
Solutions.
Access Media International estimates that the number of small
businesses in the United States using shared Internet access will grow from
400,000 in 1998 to 1.3 million by the year 2000, representing a three year
annual compound growth rate of 80%. However, affordable shared Internet access
products currently offered by networking equipment and software vendors
typically lack the flexibility and features required by most small offices. As a
result, a significant portion of the small office market has been unable to
realize the business benefits of the Internet and fully participate in the
emerging Internet-based economy. As the Internet grows, electronic commerce
initiatives are adopted, and new applications facilitated by emerging high-speed
access technologies are introduced, the inability of small offices to
effectively access the Internet will become an increasingly significant
competitive disadvantage. In order to more fully participate in the evolving
uses of the Internet, the small office market requires easy-to-use, affordable
and scalable products that enable shared Internet access by multiple users and
support a full range of existing and emerging Internet-enabled applications and
services.
8.3. THE BENEFITS OUR PRODUCTS ARE DESIGNED TO PROVIDE
Our products provide an easy-to-use, reliable and affordable shared
Internet access solution. Our solution allows multiple users in an office,
workplace or home to share the same Internet connection simultaneously while
optimizing each user's access speed. Further, our products are designed to
overcome the limitations of existing Internet access solutions by offering a
flexible and
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<PAGE>
scalable platform for firmware-based routing functionality and firewall security
to deliver Internet-enabled applications and services.
Our products inter-operate with Analog modems (28.8K, 33.6K, 56K), and
emerging high-speed technologies such as digital modems including ISDN, xDSL and
Cable or Wireless connections, and are plug and play (meaning the user simply
connects the modem to an ISB box, the ISB box to the network hub, and everyone
has secure shared access). In addition, our products extend the benefits of
analog technology by enabling multiple users to access the Internet
simultaneously through regular phone lines and analog modems at up to 30 times
the access speed of a single analog connection. Our products offer the following
key benefits:
o Efficient Shared Internet Access. The ISB product family
enables the entire office to share information, use e-mail,
and access the Internet independent of the access technology
utilized. Multiple users in an office can share a single
Internet connection and ISP account. In addition, users are
able to connect simultaneously to a remote office LAN and the
Internet.
o Ease of Installation and Use. We deliver a plug-and-play
shared Internet access solution. To facilitate easy
installation, the ISB package contains step-by-step
installation instructions and easy-to-follow diagrams and
illustrations for a variety of network environments. Users can
determine whether their computers are appropriately configured
to connect to the product. Our integrated firmware provides a
single screen configuration to connect the entire office to
the Internet. Our products work within most existing
environments and operating systems, such as Windows,
Macintosh, or UNIX, and are compatible with most network
architectures and all major Internet access technologies.
o high-speed Access. Our product family supports all major
Internet access technologies used by offices, including
analog, ISDN, xDSL, and cable modems. Our routing software
allows multiple users to connect simultaneously to the
Internet and allocates bandwidth among active users to
optimize each user's access speed. In addition, our products
aggregate the bandwidth of multiple analog or ISDN lines to
create access speeds that are up to 30 times the access speed
of a single analog or ISDN connection.
o Low Cost of Ownership. The ISB product family is designed to
minimize installation, maintenance, and Internet access
expenditures by enabling users in offices to share a single
Internet connection and ISP account. In addition, the ease of
installation and use of the ISB product family enables small
offices to avoid hiring in-house information technology
personnel that would be otherwise required to implement and
maintain an effective Internet access solution.
o Scalability and Compatibility. The ISB product family is
designed to accommodate additional users easily and to be
compatible with most widely-used computers, software, modems,
and terminal adapters. This broad compatibility enables most
offices to leverage prior technology investments by utilizing
our products with hardware and software that has already been
installed.
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o Platform for New Applications and Services. We have designed
the ISB product family to facilitate effective delivery of
value-added Internet-enabled applications and services such as
fax and voice over Internet, virtual private networking,
remote dial-in, and advanced security features. Our product
line architecture allows software-based applications to be
easily downloaded and implemented. It also provides us a
platform to deliver new Internet-enabled applications and
services to our customers.
o Firewall Protection. Our ISB products provide firewall
security among shared users.
o Virtual Private Network or VPN. This name usually refers to a
network in which some of the parts are connected using the
public Internet, but the data is transmitted in encrypted
form, thus making the network "virtually private." This
function is supported by our ISB2LAN product.
8.4. A DESCRIPTION OF OUR PRODUCTS
Our primary product line is the ISB series. The ISB products include
the ISB100e, the ISB200e and the ISB300e as well as the ISB2LAN Cable/xDSL
Internet Sharing Box. The ISB products are cost-effective network adapters that
allow everyone on an Ethernet Local Area Network or LAN, to share Internet
access at the same time using only one modem, one phone line or cable
connection, and one Internet Access Account. In addition, the ISB series of
products act as a "natural firewall," providing network security. The ISB
products are platform independent and are compatible with personal computers or
PC, Macintosh, UNIX, NT, Linux computers or any computer that uses a TCP/IP
browser interface. Retail priced from $199 to $349, the ISB line of products
provides a simple and cost-effective hardware solution for connecting multiple
PCs to the Internet.
From the simple single port ISB100e, to the more advanced three port
ISB300e and powerful cable/xDSL supporting ISB2LAN, we have an ISB for every
application: from the home with three or four PCs to the office with up to 250
PCs. The Internet connection utilized by the company determines the choice of
the product.
The ISB products fill a unique niche in the networking marketplace.
While they can act as routers, the ISB products are less expensive and provide
many additional features, including firewall and VPN security, specifically
IPSec pass-through that are not available in a stand alone router.
While the ISB products can provide the same functionality as a proxy
server, our Internet Sharing Box products are much easier to install and
configure and do not require any client software, as a proxy server does. The
ISB2LAN, is a plug and play product that can be installed on a network in a
matter of a few minutes.
All of the ISB products allow simultaneous and independent Internet
access for all users on a network, as well as natural firewall protection to
prevent any unwanted access to the local network.
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o ISB100e -- One serial port connection for use with any
external analog or ISDN modem up to a maximum transfer rate of
230k. Expanded features include modem sharing, fax sharing,
and remote access capability and VPN pass-through
functionality.
o ISB200e -- Same product as the ISB100e except with two serial
port connections to allow for up to two external modems.
Maximum transfer rate is 460k when both ports are in use. The
ISB200e will dynamically increase available bandwidth as
needed, or ports can be split for Internet access and other
modem functions at the same time.
o ISB300e -- Same product as the ISB200e except with three
serial port connections to allow for up to three external
modems. Maximum transfer rate is 690k when all three ports are
in use. The ISB300e will dynamically increase available
bandwidth as needed, or ports can be split for Internet access
and other modem functions at the same time.
o ISB2LAN -- Designed specifically for shared Internet access,
the ISB2LAN features "plug and play" installation and
configuration. The ISB2LAN connects to a cable or xDSL modem
through an Ethernet connection to accommodate high-speed data
transmission. The maximum transfer rate of the ISB2LAN is
2.5mb. The ISB2LAN supports PPPoE, remote configuration, and
provides VPN functionality.
8.5. BACKGROUND OF THE COMPANY
We were incorporated as an Arizona company on March 22, 1995. We were
formed to engage in the business of identification, acquisition, exploration
and, if warranted, development of mineral properties and the production of
minerals there from. However, as WindStar Resources, we never owned an operating
mine and, prior to the Nexland Fla. acquisition, had no other revenue-producing
mining activities. Since our merger with Nexland Fla., we have become a
designer, developer and supplier of Internet sharing devices, Internet firewall
devices and networking products and have shed all connection with the mining
business.
Upon our organization in 1995, we sold an aggregate of 498,000,000 of
our Common Stock to nineteen (19) persons and two (2) corporations for an
average price of $0.0223 per share or an aggregate of $44,450 in cash and mining
claims (later reduced to 1,992,000 based upon a subsequent reverse stock split
in April 1998, of 1 for 250). Additional mining claims were transferred to the
Company on June 30, 1995 in exchange for 1,240,000 post-split common shares and
were valued at the transferor's cost of $13,000.
On August 16, 1996, we registered 1,600,000 post-split Units which had
previously been issued in exchange for certain additional mining claims. Each
Unit consisted of one share of common stock, one "Class A Warrant" and one
"Class B Warrant." On June 19, 1998, we registered through a post-effective
registration statement, the 3,200,000 shares of Common Stock underlying our
Class "A" and Class "B" Warrants. Each A Warrant and each B Warrant entitled the
holder to purchase one share of Common Stock at $2.50 per share; and at $5.00
per share, respectively; on or
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before August 15, 2001. The warrants are redeemable at any time upon the Company
giving thirty days written notice to the holder thereof at redemption price of
$0.0025 per warrant.
On July 29, 1998, we reduced the exercise price for the Class A Warrant
holders for a specific time period. Presently, the exercise price is at $1.00
until June 30, 2000, at which time it returns to $2.50 per share. To date,
$12,839 has been raised from the exercise of 58,442 A Warrants, leaving
1,541,558 "Class A Warrants" remaining authorized and outstanding (not
exercised). Funds must continue to be raised through the exercise of the Class A
and Class B Warrants. There is no assurance that the Warrants will be exercised,
nor that we will realize any additional funding from this transaction.
On April 15, 1998, the Company's shareholders approved, among other
things, a 1 for 250 share reverse stock split; and, a change in the authorized
capital from 3,000,000,000 shares of Common Stock, $0.00001 par value per share
to 50,000,000 shares of Common Stock, $0.0001 par value, and from 400,000,000
shares of Preferred Stock $0.00001 par value per share to 10,000,000 shares of
Preferred stock, $0.0001 par value per share. There are currently 34,308,916
shares of Common Stock outstanding. No Preferred Stock has been issued.
Nexland Fla., was incorporated in Florida on December 4, 1994, but
remained dormant until November 17, 1999, when it was acquired by Windstar in a
reverse acquisition. Nexland LP was formed as a Florida limited partnership, on
September 25, 1997, and was the operating company until November 15, 1999, when
it assigned all its partnership assets, which included the ISB product line, to
Nexland Fla. From 1997 through 1999, Nexland LP's operating activities were
related primarily to developing, prototyping and testing its first ISB product,
staffing administrative, sales and marketing and operations organizations, and
establishing relationships with resellers, ISPs and Telcos for the sales of its
products. In mid-1999, Nexland LP commenced shipments of its ISB family of
products. In addition to the ISB product line, our products include hubs,
routers, mini transceivers, communication servers, Ethernet cards and Internet
adapters.
Nexland Fla. became a public company as a result of its being acquired
in "reverse acquisition" with Windstar in November 1999. The shareholders of
Nexland Fla. retain approximately 81.2% of the merged company. We trade on the
OTC bulletin board market under the symbol "XLND." Our corporate offices are
located in Aventura, Florida.
8.6. BUSINESS STRATEGY
Our intent is to become a leading provider of Internet sharing and
firewall security devices in the high-speed broadband arena. We will accomplish
our mission by completing the following tasks:
o Continuing to interoperate with other high-speed
backbone providers.
o Satisfy Customers. We believe that the Internet access
solutions currently offered
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by most personal computing and networking vendors continue to
be relatively expensive, technically complex and generally
unable to satisfy the unique requirements of the office
market. Therefore, we believe the opportunity in the office
market is significant and we intend to continue to focus our
product development efforts, distribution strategies and
support services to satisfy the specific requirements of the
office market.
o Internet-enabled business applications and services. We
believe that in order to remain competitive, offices will
experience an increasing need to access the Internet.
o Continuing to integrate emerging access technologies into our
products. Our products are designed to support all major
Internet access technologies used by consumers, including
analog, ISDN, xDSL and cable and wireless modems. We believe
our strategy of developing products that are access technology
independent will enable our installed and future customer base
to benefit from the deployment of emerging broadband
technologies. Further, we believe emerging broadband
technologies will increase the demand in offices for shared
Internet access solutions. Therefore, we intend to support the
commercialization of new broadband technologies in the design
of our product offerings and by pursuing partnering
relationships with broadband technology providers while
continuing to penetrate the existing market for our
analog-based products.
o Develop Strategic Alliances. In order to be apprized of
industry trends, to be compatible with all emerging
technologies, and to be recognized as a technologically savvy
company, we have aligned ourselves with various industry
leaders including Redback Networks, Copper Mountain Networks,
and MasTec.
8.7. SALES AND MARKETING OVERVIEW
Because of our limited working capital in the past, we have not had the
resources to fully implement a marketing and sales force. In order to increase
our revenues, we will have to develop a marketing and sales force with technical
expertise and marketing capability. We intend the sales staff to be employed
both on an independent contractor basis and as in-house employees.
The market for our products is rapidly evolving. In developing our
sales and marketing strategies we are focused on attracting users for our ISB
network products. We believe that the principal competitive factors for
companies seeking to use our type of products are facility and flexibility of
use, reliability, low cost, quality customer service, and demographic focus.
Our marketing and sales director is developing our customer base
through an active sales and marketing campaign, primarily centered on building
relationships with ISP's and Telcos. At present, we are concentrating our
efforts in North America, but anticipate expanding geographically to Latin
America.
We will strategically locate sales engineers in North America.
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Each Territory will be comprised of a sales manager, and eventually, a
sales team. Each territory sales manager will be responsible for specified
current and target (ISP and Telco) customers, and will report to the President.
Our focus will be the following:
o Increase Our ISPs and Telco Relationships. Unlike many of our
competitors, who are targeting distributors and retailers, our
strategy is to target ISPs and Telephone Companies. We believe
they can target our ultimate consumer, the office and home
users, far more efficiently and less expensively than we can
through direct marketing or through the use of value added
resellers and distributors.
o Become the Recommended Product. We believe we can become the
"recommended" product among ISPs and telephone companies. Our
brand name in the ISP and Telco markets is identified with
easy-to-use, inexpensive, affordable, and flexible innovative
shared Internet access solutions.
(A) Sales Strategy
We rely primarily on direct sales to generate new customers and to
maintain relationships with existing customers. At present, we have six sales
representatives. With the funds generated by this offering, we intend to hire
regional sales engineers. As our capacity and operations grow we will be hiring
a Vice-President of Marketing and Sales to build a quality in-house direct sales
force.
(B) Marketing Strategy
We plan to utilize a variety of marketing techniques to generate
awareness and inquiries.
o Magazine/Professional Journal/Newspaper Advertisement. We plan
to advertise in major telecommunications and Internet
magazines throughout the country using postcard inserts and
other mail-in techniques to foster inquiries and to solicit
sales.
o Trade Shows. Trade shows are a critical component for
generating awareness because of their popularity among
Internet users. Thousands of enthusiasts who surf the Net
attend trade shows each year, as well as vendors and product
manufacturers. We plan to participate in several annual local
shows and events, as well national shows starting in fiscal
year 2000. We estimate that the cost of exhibiting at a
national trade show ranges from $75,000 to $150,000 and the
cost of exhibiting at a local trade show is between $25,000
and 50,000.
o Website. We have a website (www.Nexland.com) where information
about us and our services can be obtained. Users can also
e-mail a request for contact by one of our sales
representatives at [email protected]. Interested parties can
also call a toll-free number (888-NEX-5264)and request
informational literature to be sent to them
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o Cooperative Advertising. We intend to offer customers a rebate
program for advertising our products in their desired medium
o Website Banner Advertising. We currently advertise on selected
websites.
(C) Expansion Strategy.
Our expansion strategy primarily consists of the following steps:
o Introduce New Products and Services. Our objective is to
eventually become a leading provider of secured shared
Internet access. We realize that in order to do so, we must be
innovative in our product design and capabilities and must
continually develop new collaborative management services. In
addition, we will establish strategic relationships with
leading technology developers and distribution alliances with
system integrators, system vendors, consulting companies and
Internet Service Providers.
o Expand through Acquisition. We operate in a highly fragmented
segment of the Internet. This environment provides
opportunities for a company of our size and capabilities to
acquire similar smaller firms providing complementary
services. Acquisition is a popular mechanism for building a
diverse customer base through purchase, a grass-roots
approach, which entails a large increase in overhead.
8.8. COMPETITION
In General. As with all markets growing at double-digit rates,
competition for these potential revenues are numerous and formidable. We compete
in several different markets, each having its own growth potential,
expectations, customer base, and competitors. Some of these competitors may be
affiliated with major international players and, as a result, are well financed
and may present a formidable challenge. We compete on the basis of certain
factors, including product features, time-to-market, ease of use, product,
performance, product quality, user scalability, customer support and price. We
cannot be certain that we will be able to compete with significant pricing
pressure by our competitors.
Our current and potential competitors offer a variety of competitive
products, including shared Internet access devices such as the products offered
by Linksys, RAMP Networks, Netopia and 3Com, and networking equipment such as
routers and switches offered by companies such as Ascend, Cisco, 3com, Nortel
and Intel.
Many of our competitors are substantially larger than we are and have
significantly greater financial, sales and marketing, technical, manufacturing
and other resources and more established distribution channels. These
competitors may be able to respond more rapidly to new or emerging
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technologies and changes in customer requirements or devote greater resources to
the development, promotion and sale of their products than we can. Furthermore,
some of our competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties to increase their ability
to rapidly gain market share by addressing the needs of our prospective
customers. These competitors may enter our existing or future markets with
solutions that may be less expensive, provide higher performance or additional
features or be introduced earlier than our solutions. Given the market
opportunity in the shared Internet access market, we also expect that other
companies may enter our market with better products and technologies. If any
technology that is competing with ours is more reliable, faster, less expensive
or has other advantages over our technology, then the demand for our products
and services could decrease, which could seriously harm our business.
We expect our competitors to continue to improve the performance of
their current products and introduce new products or new technologies as
industry standards and customer requirements evolve that may supplant or provide
lower cost alternatives to our products. Successful new product introductions or
enhancements by our competitors could reduce the sales or market acceptance of
our products and services, perpetuate intense price competition or make our
products obsolete. To be competitive, we must continue to invest significant
resources in research and development, sales and marketing, and customer
support. We cannot be sure that we will have sufficient resources to make such
investments or that we will be able to make the technological advances necessary
to be competitive. As a result, we may not be able to compete effectively
against our competitors. Our failure to maintain and enhance our competitive
position within the market may seriously harm our business. Increased
competition is likely to result in price reductions, reduced gross margins,
longer sales cycles and loss of market share, any of which would seriously harm
our business. We cannot be certain that we will be able to compete successfully
against current or future competitors or that competitive pressures will not
seriously harm our business.
Our potential competitors in the ISB market are as follows:
o Ramp Networks, Inc.
o Flowpoint
o WebBeedle
o Cayman Systems
o Sonic Wall
o Netopia
o Linksys
o Nortel
o Macsense
o UMAX
We believe that we have several advantages over these competitors,
including:
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o we offer one of the only NAT routers with IPSec VPN
pass-through support and have a patent pending on this
technology
o we enjoy a time-to-market advantage and are therefore well
positioned to capture a large percentage of early adopteers,
which are generally among the heaviest users
o we have established strategic alliances with major technology
companies.
o we are cost competitive
o our products combine features of various competitors
o we developed one of the first PPPoE routers.
Non-Competition. On November 17, 1999, we entered into a Mutual
Non-Competition Agreement with Nexland France, which company we have an option
to purchase. The terms of the Agreement provide for:
o a five year term
o Nexland France shall have exclusive sales rights to Europe
o we shall have exclusive sales and marketing rights to the rest
of the world
o if either party sells into the other's territory, the sales
contracts shall be assigned to the other party, and the
assignee shall pay the assignor 20% of the gross value of the
contract
8.9. YEAR 2000.
The "Year 2000" issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
application of computer programs which have been written using two digits,
rather than four, to define the applicable year of business transactions.
We established and completed a program during 1999 to ensure that, to
the extent reasonably possible, all systems are Year 2000 compliant. To date we
have not have had any problems associated with Y2K.
The Year 2000 Program consisted of:
o Inventory of systems, equipment, software and hardware
including those of significant third-party suppliers and
customers.
o Analysis of the systems to determine compliance or
non-compliance.
o Remediation and contingency plan development.
o Testing of affected systems.
o The team designed an aggressive schedule to identify systems
requiring compliance upgrades and tested the systems.
Although there continues to be some uncertainty in the Year 2000 issue,
based on the results of our Year 2000 Program and the lack of problems thus far,
we currently do not believe that the Year 2000 issue will have a material effect
on our internal network, computer systems or operations.
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We have not established contingency plans in case of failure of our
internal network and computer systems since we currently believe that such
systems are Year 2000 compliant.
We are dependent on a number of third party product and service
providers. We have performed a technical review of significant third party
suppliers and customers and, if available, have surveyed the public Year 2000
statements issued by them. Additionally, we have sent inquiries to certain third
party suppliers and customers requesting information regarding their
vulnerability to Year 2000 issues. Based on our review and inquiry we believe
that they have minimum vulnerability to Year 2000 issues. Although we are not
presently aware of any third party Year 2000 issues that are likely to result in
any disruption of our services, the failure of our third party network service
providers to properly correct a Year 2000 problem could result in the
interruption or failure of certain normal business activities or operations.
We have not established contingency plans in case of failure of our
third party network service providers since we currently believe that they have
minimum vulnerability to Year 2000 issues. A significant Year 2000-related
disruption of these network services could cause customers to consider seeking
alternate providers or cause a significant burden on customer service and
technical support.
8.10. INTELLECTUAL PROPERTY
We rely and intend to rely on a combination of patent, copyright,
trademark and trade secret laws and restrictions on disclosure to protect our
intellectual property rights. We have obtained registered trademarks for
"Nexland" and "The Internet Sharing Box" with the U.S. Patent and Trademark
Office. We have one patent pending relating to technology incorporated in our
ISB family of products, consisting of an algorithm that allows the VPN IPSec
encrypted protocol to pass through our NAT routers, thus securing the
communication from unintended third parties. In addition, we design and
implement proprietary coded "firmware" which is designed to make the ISB
products function.
We cannot assure you that others will not independently develop similar
or competing technology. We also intend to enter into confidentiality agreements
with our employees and consultants, and control access to and distribution of
our documentation and other proprietary information. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use our products or technology. We cannot assure you that
these precautions will prevent misappropriation or infringement of our
intellectual property. Monitoring unauthorized use of our products is difficult,
and we cannot assure you that the steps we have taken will prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect our proprietary rights as fully as in the United States.
Our industry is characterized by the existence of a large number of
patents and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the data
communications and networking markets have extensive patent
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portfolios with respect to modem and networking technology. From time to time,
third parties, including these leading companies, have asserted and may assert
exclusive patent, copyright, trademark and other intellectual property rights to
technologies and related standards that are important to us. We expect that we
may increasingly be subject to infringement claims as the numbers of products
and competitors in the office market for shared Internet access solutions grow
and the functionality of products overlaps.
In addition, we cannot assure you that third parties will not assert
additional claims or initiate litigation against us or our manufacturers,
suppliers or customers alleging infringement of their proprietary rights with
respect to our existing or future products. We may in the future initiate claims
or litigation against third parties for infringement of our proprietary rights
to determine the scope and validity of our proprietary rights. Any such claims,
with or without merit, could be time-consuming, result in costly litigation and
diversion of technical and management personnel, or require us to develop
non-infringing technology or enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on acceptable
terms, if at all. In the event of a successful claim of infringement and our
failure or inability to develop non-infringing technology or license the
proprietary rights on a timely basis, our business, operating results and
financial condition could be materially adversely affected.
8.11. EMPLOYEES
As of March, 2000, we employed four persons, including one in
operations, one in sales and marketing, and two in customer support,
engineering, research and development. We also employ a number of commissioned
sales representatives. None of our employees is represented by a labor union and
we have experienced no work stoppages to date. We believe our employee relations
are good. At present, only our president, Gregory S. Levine, is subject to a
November 17, 1999, employment agreement with us which provides for:
o a five year term
o base salary of $100,000, until we obtain equity or debt
financing of at least $1,000,000, at which time the salary
shall be $150,000
o we may terminate without cause after December 31, 2001, other
than in connection with a change of control, in which case the
employee shall receive one year severance pay
o should employee be terminated, without cause, 90 days prior,
or one year subsequent, to a change of control, he shall be
entitled to twice his annual salary. "Change of control" is
defined as any person or group (as defined by the Securities
Exchange Act of 1934) obtaining 50% or more of our voting
securities, or a restructuring of the Company.
8.12. PROPERTY LOCATION, DESCRIPTION AND ACCESS
We currently lease our offices located at Aventura Corporate Center,
20801 Biscayne Blvd.,
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Suite 403, Aventura, Florida 33180. In August 1998, we signed a six month
sub-lease, which terminated on February 28, 2000, for approximately 1,300 square
feet of corporate office space at a base rent of $3,000 per month plus common
area maintenance costs. We have not renewed the lease, and will lease on a
month-to-month basis until a new location is determined or new lease is
executed. Our inventory is located in a bonded warehouse in Miami, Florida, near
the Miami International Airport. Although no lease exists on either location at
present, we do not believe that we will experience difficulty in locating
alternate space should the need arise. Our telephone number is (305) 937-3877.
8.13. RESEARCH AND DEVELOPMENT
On September 15, 1999, Nexland Fla. confirmed a technology sharing
arrangement which it had with Nexland France since the beginning of Nexland's
activities. In addition, on March 14, 2000, we entered into a five year
Consulting Agreement with Nexland France, which provides for the following:
o $175,000 per annum consulting fee to commence when we obtain
at least $1,000,000 in financing
o the consulting services will be performed by Israel Daniel
Sultan, Nexland LP's founder, and one of our principal
shareholders
o we may terminate without cause after December 31, 2001, other
than in connection with a change of control, in which case the
consultant shall receive one year severance pay
o should consultant be terminated, without cause, 90 days prior,
or one year subsequent, to a change of control, consultant
shall be entitled to twice its annual fee. "Change of control"
is defined as any person or group (as defined by the
Securities Exchange Act of 1934) obtaining 50% or more of our
voting securities, or a restructuring of the Company.
8.14. MANUFACTURING
We have developed a fully outsourced manufacturing capability for the
production of our products. This approach enables us to reduce fixed costs and
to provide flexibility in meeting market demand. Our manufacturing is primarily
conducted in Taiwan. Our primary relationship is with Smerwick Ltd., a Hong Kong
corporation, with a branch located in Taiwan, whose principal owners are two of
our principal shareholders, Laurent Solomon and Andre Choraqui. Our relationship
with Smerwick is based upon a January 1999 Cooperation Agreement that allows us
to be flexible, highly responsive to upside demand and limits, and which
provides for Smerwick to:
o coordinate all of our manufacturing efforts
o inspect our products
o consolidate and organize our shipments
o and handle our exports.
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In exchange, Smerwick receives a fee equal to 3% of invoices issued to
us for the manufacture of our products. The Cooperation Agreement may be
canceled on 30 days notice.
8.15. LEGAL MATTERS
We are subject to a variety of federal and state laws and
regulations, especially those governing the communications and securities
fields.
8.16. DIVIDEND POLICY
We have never paid a cash dividend on our Common Stock and do not
expect to pay a cash dividend in the foreseeable future, but intend to devote
all funds to the operations of our business.
8.17. AVAILABILITY OF INFORMATION
The public may read and copy any materials we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. In addition, we file electronically with the
SEC and you may access our filings at the SEC's Internet site
(http:/www.sec.gov). Our Internet site is www.nexland.com
9. OUR MANAGEMENT
9.1. OUR DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each
Officer and Director of the Company:
<TABLE>
<CAPTION>
Name Age Position Term
- ---- --- -------- ----
<S> <C> <C> <C>
Gregory S. Levine 33 President/ Chairman of 1999-2000
the Board of Directors
Richard G. Steeves 60 Secretary and Director 1999-2000
</TABLE>
(A) Term of Office
The terms of office of the current directors continue until the annual
meeting of stockholders, which the Bylaws provide shall be held on the third
Friday of November of each year; officers are elected at the annual meeting of
the board of directors, which immediately follows the annual meeting of
stockholders.
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(B) Director and Key Employee Backgrounds
Gregory Scott Levine, 33, President and Board Chairman, received his
Bachelor of Arts Degree in Speech Communication and English Writing from the
University of Florida 1989, and attending Capital Law and Graduate Center in
Columbus, Ohio without receiving a degree. After leaving law school in 1991, Mr.
Levine entered the computer industry by taking the Purchasing Manager position
with All Exim, Miami, Florida, where he was employed until 1995. In 1995 to
1997, Mr. Levine worked as a consultant In 1997, Mr. Levine was hired as the
Business Unit Manager for Mass Storage and Components for Computer
2000/AmeriQuest Technologies where he supervised the business unit and was
associated with the development of the OEM Memory Broker Desk In 1998, when
C2000 sold AmeriQuest, Mr. Levine opened his own consulting firm, the HG America
Group, Inc. It served major industry telcos (AT&T, GTE, Bell Atlantic) with
internet sharing and firewall products. Mr. Levine operated HG America Group,
Inc. until he joined Nexland in December, 1998. None of Mr. Levine's prior
employers are affiliated with the Company.
Richard George Steeves, 60, is Secretary and a member of the Board of
Directors. Mr. Steeves has been a member of our Board of Directors since
November 1996 and from 1997 to 1999, has been our Treasurer and Chief Financial
Officer. Since August 1994, Mr. Steeves has been the President and a member of
the Board of Directors of JOHSTE, Inc., an Illinois corporation. JOHSTE, Inc.
consults with companies on business management. Since April 1993, Mr. Steeves
has been the President and a member of the Board of Directors of Sandaz
Corporation, a Nevada corporation. Sandaz Corporation is a natural resources
company. Since April 1993, Mr. Steeves has been the President and a member of
the Board of Directors of RGS Services, Inc., an Illinois corporation. RGS
Services, Inc. consults with companies on business management, transportation
and taxes. Mr. Steeves received a B.A. from Hampton Institute, Hampton,
Virginia. None of Mr. Steeves' prior employers are affiliated with the Company.
(C) Board Compensation
We do not currently compensate our directors, but they are reimbursed
for out-of-pocket expenses incurred in connection with attendance at meetings of
the board of directors or its committees. Our directors are generally eligible
to participate in our 1999 stock option plan.
9.2. INDEMNIFICATION.
Our Articles of Incorporation provide that the Company's directors and
officers will be indemnified to the fullest extent permitted by the Arizona
Corporation Code, however, such indemnification shall not apply to acts of
intentional misconduct; a knowing violation of law; or, any transaction where an
officer or director personally received a benefit in money, property, or
services to which to the director was not legally entitled.
Our bylaws provide that we indemnify our directors and executive
officers and may indemnify our officers, employees, and other agents to the full
extent permitted by law. We believe
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that indemnification under our bylaws covers at least negligence on the part of
an indemnified party. Our bylaws also permit us to advance expenses incurred by
an indemnified party in connection with the defense of any action or proceeding
arising out of his or her status or service as a director, officer, employee or
other agent of the company upon an undertaking by him or her to repay such
advances if it is ultimately determined that he or she is not entitled to
indemnification.
We believe that our certificate of incorporation and bylaw provisions
and indemnification agreements are necessary to attract and retain qualified
persons as directors and executive officers. We also intend to acquire
directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of the company where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for such
indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, executive officers or persons controlling the
company, we have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
9.3. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
(A) (B) (C) (D) (E) (F) (G) (H) (I)
Name & Other[l] Restricted Securities All other
Principal Annual Stock Underlying LTIP Compensation
Position Year Salary Bonus Compen- Awards Options Payouts
sation[3]
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Greg Levine
President 1999-2000 $100,000[1] -0- -0- -0- -0- -0- -0-
Richard G. 1999-2000 $ [5] -0- -0- -0- -0- -0- -0-
Secretary
Fred Schmid 1999-2000
Former Chief Executive
Officer and President 7,500[3] 226,885[2] 320,000[4] -0- -0-
</TABLE>
[1] Mr. Levine's base compensation increases to $150,000, upon the Company
raising at least $1,000,000 in debt or equity financing.
[2] We entered into a three (3) year employment agreement with our former
president, Fred R. Schmid, effective November 11, 1997. Since salary was not
paid, compensation and interest accrued in the approximate amount of $136,422
which was converted into 136,422 (plus 20,463 penalty shares) shares of our
common stock and is being registered in this offering. In April, 1999, the
employment agreement was terminated and replaced with a consulting agreement
which compensated Mr. Schmid at the rate of 10,000 shares per month. By
November, 1999, Mr. Schmid
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had accumulated 70,000 additional shares of our common stock.
[3] The April 1997 consulting agreement, and Mr. Schmid, in his capacity as CEO
and president, were terminated in November, 1999, as a result of our merger with
Nexland Fla. and replaced with a new two year consulting agreement with
compensation at the rate of 15,000 common shares, quarterly, half of which was
earned in 1999.
[4] The November 11, 1997 employment agreement also provided Mr. Schmid an
option for the purchase of 160,000 shares at $2.50 per share and 160,000 shares
at $5.00 per shares for a period of ten years. On July 29, 1998, the $2.50
option price was reduced to conform with the offer granted to the Warrant
holders to exercise the Class A Warrants at a reduced price of $1.00 for a
specific time period. In February, 2000, Mr. Schmid exercised 160,000 of these
options, the underlying shares are covered by this registration statement.
[5]Mr. Steeves is compensated at the rate of $50.00 per hour
9.4 Stock Option Plan
On November 2,1999 the Company Board of Directors adopted its 1999
Nonqualifying Stock Option Plan, which was registered pursuant to an S-8
Registration Statement on November 4, 1999. Under the Plan, employees or other
persons associated with the Company, including, without limitation, any
employee, director, officer, attorney or consultant of the Company are eligible
for options to purchase shares of the Company's Common Stock. The purpose of the
Plan is to assist the Company in hiring, retaining and developing strong
management by providing an opportunity for employees to purchase stock in the
Company. The number of common shares available for options under the Plan is
1,000,000. No options have been granted under the Plan as of the date of this
Memorandum. Subsequent to the completion of the Offering, the Company expects to
issue options as an inducement for managerial and qualified personnel to remain
with and to join the Company.
Administration of the Plan is by the Board of Directors or a committee
appointed by the Board of Directors which consists of not less than three
members (the "Committee"). To date, no such Committee has been appointed, and
the Board has elected to administer the Plan itself.
Optionees have no rights as stockholders with respect to shares subject
to option prior to the issuance of shares pursuant to the exercise thereof.
Options issued to employees under the Plan shall expire no later than ten years
after the date of grant. An option becomes exercisable at such time and for such
amounts as determined at the discretion of the Board of Directors or the
Committee at the time of the grant of the option. An optionee may exercise a
part of the option from the date that part first becomes exercisable until the
option expires. The purchase price for shares to be issued to an employee upon
his exercise of an option is determined by the Board of Directors or a Committee
on the date the option is granted, but in no case may an option be exercisable
for less than 100% of the market value (as defined in the Plan) of the Common
Stock on the date of the grant. The purchase price is payable in full in cash or
by delivery of shares of Common Stock of the Company (or a combination of cash
and Common Stock) when the option is exercised.
The Plan provides for adjustment as to the number and kinds of shares
covered by the outstanding options and the option price therefor to give effect
to any stock dividend, stock split, stock combination or other reorganization of
or by the Company. In the event of liquidation, dissolution, merger, sale or a
corporate reorganization, the ability to exercise the options shall be
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accelerated so that they shall become immediately exercisable just prior to the
consummation of such transaction. If options expire or terminate without having
been exercised in full, the unpurchased shares shall again be available for
issuance under the Plan. Unless sooner terminated by the Board of Directors, no
additional options may be granted after November 1, 2009. The Plan has not been
qualified with the Internal Revenue Service.
10. CERTAIN TRANSACTIONS
(A) Registrant has engaged in no transactions with management or others
in which the amount involved exceeds $60,000 other than the following:
(1) On November 11, 1997, we granted Schmid an option to purchase
up to 160,000 shares of Common Stock at a purchase price ranging between $1.00
and $2.50(which was subsequently reduced to between $0.25-2.50) per share. The
option period commenced on the second anniversary of the date of this Agreement
and ending ten years after the second anniversary date. The Company estimates
that substantially all of these options will be exercised during the contractual
period. In addition, the Company granted Schmid an option to purchase an
additional 160,000 shares of Common Stock at a purchase price of $5.00 per
share. The option period commences on the third anniversary date of this
Agreement and ends ten years after the third anniversary date. In February 2000,
160,000 options were exercised at $1.00 per share and the underlying shares are
covered by this registration statement.
(2) On November 3, 1999, Nexland Fla., obtained an option,
including a right of first refusal, to purchase all of the issued and
outstanding shares of Nexland France. The option will expire on June 30, 2000.
The purchase price is to be determined by an independent valuation conducted by
a French accounting firm and be mutually acceptable to both parties. Nexland
France is controlled, by Israel Daniel Sultan, Andre Chouraqui, and Yves Many,
all of whom are principal shareholders of our company. In consideration of the
option and right of first refusal, these three individuals received a total of
1,584,000 of our common shares.
(3) On November 17, 1999 we entered in a consulting agreement with Fred
Schmid, our former CEO and president. The agreement provides for the following:
o 15,000 common shares quarterly, payable in arrears
o two year term subject to automatic renewal unless 30 day
notice not to renew
o consultant is to provide consulting services regarding the
raising of capital and other financial matters
o consultant is subject to the customary confidentiality
restrictions
(4) On January 18, 1999, we executed a Cooperation Agreement with
Smerwick Ltd., a Hong Kong corporation located in Taiwan, in a non-arms length
negotiation. Smerwick's principal owners are two of our principal shareholders,
Laurent Solomon and Andre Chouraqui. Smerwick coordinates all of our
manufacturing efforts, inspects our products, consolidates and organizes our
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shipments, and handles our exports prior to leaving Taiwan. Smerwick acts as our
dealer by purchasing our requirements from the manufacturer and reselling the
products to us at a 3% markup. The Cooperation Agreement is cancelable on 30
days notice.
(5) On September 15, 1999, we confirmed a technology sharing agreement
with Nexland France, making their research and manufacturing facilities
available to us.
(6) On November 17, 1999, we acquired, in a reverse acquisition
transaction, Nexland Fla. whose principal shareholders now own approximately
81.2% of our common shares. As a condition of the transaction, we have agreed to
register under cover of this registration statement, approximately 300,635
shares of certain of our creditors, Fred R. Schmid and Erik Nelson. Included in
these shares are 39,213 shares issued due a 5% penalty provision resulting from
the late filing of this registration statement.
(7) On March 14, 2000, we entered into a five year Consulting Agreement
with Nexland France, which provides for the following:
o $175,000 per annum consulting fee to commence when we obtain
at least $1,000,000 in financing
o the consulting services will be performed by Israel David
Sultan, Nexland LP's founder, and one of our principal
shareholders
o we may terminate without cause after December 31, 2001, other
than in connection with a change of control, in which case the
consultant shall receive one year severance pay
o should consultant be terminated, without cause, 90 days prior,
or one year subsequent, to a change of control, consultant
shall be entitled to twice its annual fee. "Change of control"
is defined as any person or group (as defined by the
Securities Exchange Act of 1934) obtaining 50% or more of our
voting securities, or a restructuring of the Company.
(8) As of December 31, 1999, we are obligated to one of our principal
shareholders, Israel Daniel Sultan, on unsecured cash loans in the amount of
$189,218.45. The loans are evidenced by demand promissory notes, which bear
interest equal to the applicable federal rate, and are subject to adjustment on
August 1, 2000. The notes are all payable on demand.
11. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of March 27, 2000 as to (i) each
person (or group of affiliated persons) known by us to own beneficially more
than 5% of our outstanding common stock, (ii) each of our directors, (iii)each
of the executive Officers, and (iv) all directors and executive officers of the
company as a group.
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For the purpose of this table, beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. The number
of shares beneficially owned by a person includes shares of common stock subject
to options held by that person that are currently exercisable or exercisable
within 60 days of March 28, 2000. Shares issuable pursuant to such options are
deemed outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for the purposes of computing the
percentage ownership of each other person.
Percentage of shares beneficially owned is based on 34,308,916 shares
of common stock outstanding as of January 2000.
Name and Address Number of Shares Percent of Class [7]
of Beneficial Owner [6] ---------------- --------------------
- -----------------------
BH Investor Group, LLC[1] 12,611,250 36.8
P.O. Box 3783,
Hallandale, Fla 33008
Andre Chouraqui 5,044,500 14.7
Barker Road #2, House #9
The Peak, Hong Kong
Fast-Access Group, LLC [2] 5,044,500 14.7
P.O. Box 9096
Daytona Beach, Fla. 32120
Broadband Investor Group, LLC[3] 2,602,500 7.6
P.O. Box. 693267
Miami, Fla. 33169
High-Speed Venture, LLC[4] 2,522,250 7.4
P.O. Box 693267
Miami, Fla. 33169
Richard G. Steeves[5] 10,466 0.0003
1911 E. Meadowlake Drive
Mahomet, Ill. 61586
All directors and executive 2,612,966 8.0
officers as a group
- -------------------------------
[1] this entity is controlled by Israel Daniel Sultan
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[2] this entity is controlled by Laurent Solomon
[3] this entity is controlled by Greg Levine, our president
[4] this entity is controlled by Yves Many
[5] Richard Steeves is our Secretary and a director of the Company
To the knowledge of management, there are no present arrangements or
pledges of securities of the Company, which may result in a change in control of
the Company.
12. MARKET PRICE OF SECURITIES
Our common stock is traded on the NASDAQ over-the-counter bulletin
board market under the symbol "XLND." There has been trading in our common stock
since December 23, 1999.
The following table sets forth, for each of the fiscal periods
indicated, the high and low bid prices for the common stock, as reported on the
OTC Bulletin Board. These per share quotations reflect inter-dealer prices in
the over-the-counter market without real mark-up, markdown, or commissions and
may not necessarily represent actual transactions.
QUARTER ENDING HIGH/BID LOW/BID
FISCAL YEAR 1999
December 1999 $7.125 $4.00
On March 27, 2000, the closing trade price of the common stock as
reported on the OTC Bulletin Board was $6.062 As of such date, there were
approximately 398 holders of record of our common stock.
12.1 VOLATILITY AND FLUCTUATION OF OUR COMMON STOCK
The price of our common stock and Internet and Telecommunication stock
in general, is highly volatile. During the period from December 23, 1999 to
March 27, 2000, the bid and ask price of our common stock has ranged from a high
of $8.00 to a low of $4.00. This volatility may negatively impact the liquidity
and value of your shares. The market price of our common stock could continue to
fluctuate substantially due to a variety of factors, including:
o The number of shares in the market at the time as well as the
number of shares we may be required to issue in the future,
compared to the market demand for our shares.
o Our performance and whether or not we meet our projections.
o General economic and market conditions.
o Quarterly fluctuations in results of operations.
o The commencement of or major developments in litigation.
o Announcement of key developments or new products or services
by competitors.
o Announcement and market acceptance of acquisitions.
o Changes in earnings estimates by analysts.
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o Press coverage of favorable or unfavorable developments in our
business.
o Loss of key personnel.
o Changes in accounting principles or policies.
o Sales of common stock by existing stockholders.
o Economic and political conditions
The market price for our common stock may also be affected by our
inability to meet analysts' expectations. Any failure to meet these
expectations, even slightly, could have an adverse effect on the market price of
our common stock.
In addition, the market prices of securities issued by many companies
may change for reasons unrelated to the operating performance of these
companies.
Following periods of volatility in the market price of other companies'
securities, class action securities litigation has often been instituted. If
similar litigation were instituted against us, it could result in substantial
costs and a diversion of our management's attention and resources, which could
have an adverse effect on our business.
13. DESCRIPTION OF THE SECURITIES
13.1 IN GENERAL
Our articles of incorporation provide that we may issue up to
50,000,000 shares of its $0.0001 par value Common Stock and 10,000,000 shares of
its $0.0001 par value Preferred Stock. Presently 34,308,916 shares of the
Company's Common Stock are issued and outstanding. There are no preferred shares
outstanding. In the event all of the Class A Warrants are exercised, there will
be 35,850,474 shares of Common Stock outstanding and in the event all of the
Class B Warrants are exercised, in additional to the Class A Warrants, there
will be 37,450,474 shares of Common Stock outstanding. See "Capitalization" and
"Risk Factors - Cumulative Voting, Preemptive Rights and Control."
13.2 COMMON STOCK
The holders of the Company's Common Stock are entitled to one vote per
share on each matter submitted to a vote at any meeting of shareholders. Shares
of Common Stock do not carry cumulative voting rights and, therefore, a majority
of the outstanding Common Stock will be able to elect the entire Board of
Directors and, if they do so, minority shareholders would not be able to elect
any members to the Board of Directors. As of January 14, 2000, we had
approximately 398 shareholders of record. Holders of the common stock have no
preemptive rights to acquire additional shares of Common Stock or other
securities. The Common Stock is not subject to redemption or sinking fund
provisions and carries no subscription or conversion rights. In the event of
liquidation of the Company, the shares of Common Stock are entitled to share
equally in corporate assets after satisfaction of all liabilities. The shares of
Common Stock, when issued, will be fully paid and non-assessable.
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Holders of common stock are entitled to receive such dividends as may
be declared from time to time by our Board of Directors out of funds legally
available. If we were to liquidate, dissolve, or wind up our affairs, holders of
Common Stock would share proportionately in our assets that remain after payment
of all debts and obligations and after any liquidation payments with respect to
the preferred stock. There are no outstanding options, warrants, or rights to
purchase shares of the Company's Common Stock, other than as disclosed in this
Prospectus.
13.3 PREFERRED STOCK
Our Articles of Incorporation authorize the issuance of "blank check"
preferred stock. The board of directors is empowered, without stockholder
approval, to designate and issue additional series of preferred stock with
relative rights, preferences, designations, rates, conditions, privileges,
limitations, dividend rates, conversion rights (including the right to issue
convertible securities with no limitations on conversion), preemptive rights,
voting rights, rights and terms of redemption, liquidation preferences and
sinking terms. Any such designations and issuances, could:
o Adversely affect the voting power or other rights of the
holders of our common stock.
o Substantially dilute the common shareholder's interest.
o Depress the price of our common stock.
o Be superior to the rights of holders of Common Stock.
In addition the issuance of "blank check preferred stock could be
utilized as an anti-takeover measures, which could have the effect of delaying,
deterring, or preventing a change in control without any action by the
shareholders.
13.4 DESCRIPTION OF REDEEMABLE WARRANTS
The Redeemable Class A and Class B Warrants, have been issued under
warrant certificates (the "Warrant Certificates") between the Company and Jersey
Transfer & Trust Company, Warrant Agent (the "Warrant Agent"). The following
summary of certain provisions of the Warrant Certificates does not purport to be
complete and is qualified in its entirety by reference to the Warrant
Certificates.
Each Redeemable Class A or Class B Warrant entitles the owner to
purchase one share of Common Stock. The Redeemable Class A Warrants are
exercisable at any time from the effective date of this offering until August
15, 2001, at an exercise price of $1.00 until June 30, 2000 and $2.50 per share
thereafter. The Redeemable Class B Warrants are exercisable at any time from the
effective date of this offering until August 15, 2001, at an exercise price of
$5.00, collectively referred to as the "Exercise Price." At the time a
Redeemable Warrant is exercised, the exercise price therefore shall be paid in
full. Prior to expiration, the Redeemable Warrants may be
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exchanged, transferred, or exercised by the Registered Warrant holder by
presenting the Redeemable Warrants to the Warrant Agent. The Redeemable Class A
and Class B Warrants are redeemable by the Company upon thirty (30) days written
notice at the discretion of the Board of Directors, at a redemption price of
$0.0025 per Warrant. The Redeemable Class A and Class B Warrants are redeemable
at any time from the effective date of this offering until August 15, 2001. Upon
redemption of the Redeemable Warrants, if the holder does not exercise the
Redeemable Warrants, the Redeemable Warrant lose all value.
Fractional shares will not be issued upon exercise of Redeemable
Warrants and the Company will not make any cash or other adjustments in respect
of a fraction of a share of Common Stock to which any holder might otherwise be
entitled upon exercise of Redeemable Warrants. No adjustments as to previously
declared or paid cash dividends, if any, will be made upon any exercise of
Redeemable Warrants. The Redeemable Warrants do not confer on the holders
thereof, any voting or other rights of a stockholder of the Company.
The Company will have authorized and reserved for sale the stock
purchasable upon exercise of the Redeemable Warrant. When delivered, such shares
of stock shall be fully paid and non-assessable.
The Warrant Agent will not receive a fee for soliciting the exercise of
the Warrants. The Company may pay a solicitation fee to any NASD registered
representative, who, after one year from the effective date of the registration
statement, causes the exercise thereof prior to the expiration thereof.
The Exercise Price and the number of shares issuable upon exercise of
the Redeemable Warrants are subject to adjustment by the Board of Directors upon
the occurrence of certain events, including the issuance of any Common Stock as
a dividend or any stock split or reverse split as a dividend. Adjustments in the
number of shares issuable or in the Exercise Price of both shall also be made in
the event of any merger or other reorganization.
The Warrant Certificates will also provide that the Company and the
Warrant Agent may, without the consent of the holder of the Redeemable Warrants,
make changes in the Warrant Certificates which do not adversely affect, alter or
change the rights, privileges or immunities of the Registered Warrant holders of
the Redeemable Warrants.
13.5 ANTI-TAKEOVER PROVISIONS OF ARIZONA LAW
As an Arizona corporation, we are subject to the provisions of
Section 10-2741, 10-2742 and 10-2743 of the Arizona Revised Statutes. In
general, the statute prohibits a publicly held Arizona corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date that the person became an interested stockholder
unless (with certain exceptions) the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a "business combination"
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includes a merger, asset or stock sale or other transaction resulting in a
financial benefit to the stockholder, and an "interested stockholder" is a
person who, together with affiliates and associates, beneficially owns (or
within three years prior, did own) 10% or more of the corporation's outstanding
voting stock. This provision may have the effect of delaying, deferring, or
preventing a change in control of our company without further action by the
stockholders.
14. SHARES ELIGIBLE FOR FUTURE SALE.
14.1 IN GENERAL
In the event that no Warrants are exercised the Company will have
outstanding 34,308,916 shares of Common Stock. If all Class A and Class B
Warrants are exercised, there will 37,450,474 shares of Common Stock
outstanding. The shares to be issued upon the exercise of the Class A and Class
B Warrants are expected to be freely tradeable without restriction or further
registration under the Securities Act of 1933, as amended (the "Act"), except
for shares purchased by an existing "affiliate" of the Company, which will be
subject to the limitations of Rule 144 promulgated under the Act except the one
year holding period.
14.2 RESTRICTED SECURITIES
Shares not covered by this or prior registration statements, are
"restricted securities" as defined in Rule 144. Restricted securities may be
sold in the public market only if they are registered or if they qualify for an
exemption from registration under the Securities Act. In general, under Rule
144, 90 days after the date of this prospectus, a person (or persons whose
shares are aggregated), including an affiliate, who has satisfied a one (1) year
holding period may sell in ordinary market transactions through a broker or with
a market maker, within any three (3) month period a number of shares which does
not exceed the greater of one percent (1%) of the number of outstanding shares
of Common Stock or the average of the weekly trading volume of the Common Stock
during the four calendar weeks prior to such sale. Sales under Rule 144 require
the filing of Form 144 with the Securities and Exchange Commission. If a person
who is not an affiliate has held the shares of Common Stock for more than two
years, there is no limitation on the manner of sale or the volume of shares that
may be sold and no Form 144 is required. Sales under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock.
14.3 TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent and Warrant Agent for the Company's Common Stock,
Class A Redeemable Warrants and Class B Redeemable Warrants is:
Jersey Transfer & Trust Co.
201 Bloomfield Ave.
Verona, NJ 07044
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15. SELLING SECURITY HOLDERS
On November 17, 1999, as part of our obligation under the Acquisition
Agreement, we agreed to register the shares of certain individual as follows:
<TABLE>
<CAPTION>
Name Position With Common Shares Owned Common Shares Offered Common Shares Owned
Company Prior to Offering For Account of Security Following Offering (%)
Holder
<S> <C> <C> <C> <C> <C>
Fred R. Schmid President /CEO 942,710 316,885 942,710 2.7
11/97-11/99
Erik Nelson Finder[1] 143,750 143,750 143,750
</TABLE>
[1] These share were paid to Mr. Nelson for his efforts in arranging for the
acquisition of Nexland Fla. He has no other material relationship to the
Company.
16. PLAN OF DISTRIBUTION
Sale of Warrants. The Company is offering the shares of the Company's
Common Stock, which may be purchased upon the exercise of the outstanding
Warrants, on a "best efforts" basis. No commissions will be paid to any persons
in connection with the exercise of the Warrants. Any solicitation of the holders
of the Warrants to exercise their Warrants will be made only by the Company and
will be accomplished or preceded by the delivery of this Prospectus.
The Redeemable Class A Warrants are exercisable at any time from the
effective date of this offering until August 15, 2001, at an exercise price of
$1.00 until June 30, 2000 and $2.50 per share thereafter. The Redeemable Class
B Warrants are exercisable at any time from the effective date of this offering
until August 15, 2001, at an exercise price of $5.00. Collectively referred to
as the "Exercise Price." At the time a Redeemable Warrant is exercised, the
exercise price therefor shall be paid in full. Prior to expiration, the
Redeemable Warrants may be exchanged, transferred, or exercised by the
Registered Warrant holder by presenting the Redeemable Warrants to the Warrant
Agent. The Redeemable Class A and Class B Warrants are redeemable by the Company
upon thirty (30) days written notice at the discretion of the Board of
Directors, at a redemption price of $0.0025 per Warrant. The Redeemable Class A
and Class B Warrants are redeemable at any time from the effective date of this
offering until August 15, 2001. Upon redemption of the Redeemable Warrants, if
the holder does not exercise the Redeemable Warrants, the Redeemable Warrant
will lose all value.
Persons who wish to exercise their Warrants must deliver an executed
Warrant with the form of Election to Purchase, duly executed, accompanied with
payment in check or money order payable to Nexland, Inc. for the number of
shares subscribed,($1.00 per share for the A Warrants until June 30, 2000 and
thereafter $2.50 per share; and $5.00 per share for the B Warrants) to Jersey
Transfer & Trust Co., 201 Bloomfield Ave., Verona, N.J. 07044, (973) 239-2712
(the "Warrant Agent"). All payments must be received by the Warrant Agent prior
to the termination of the exercise period;
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Warrants not exercised prior to the termination of the exercise period will
expire. See, "Description of Securities - Warrants."
Selling Security Holders. The Shares may be offered and sold from time
to time by the Selling Security Holders. The Selling Security Holders will act
independently of Nexland in making decisions with respect to the timing, manner,
and size of each sale. Such sale may be made on the OTC Bulletin Board or
otherwise, at prevailing prices and terms or at prices related to the then
market price, or in negotiated transactions.
To the best of our knowledge, the Selling Security Holders have not, as
of the date hereof, entered into any arrangement with a broker or dealer for the
sale of shares through a block trade, special offering, or secondary
distribution of a purchase by a broker-dealer.
In effecting sales, broker-dealers engaged by the Selling Security
Holders may arrange for other broker-dealers to participate. Broker-dealers may
receive commissions or discounts from the Selling Security Holder in amounts to
be negotiated.
In offering their shares, the Selling Security Holders, and any
broker-dealers who execute sales for the Selling Security Holders, may be
considered "underwriters" within the meaning of the Securities Act. In
connection with such sales, any profits realized by the Selling Security Holders
and any compensation of such broker-dealer may be considered an underwriting
discount or commission.
We have advised the Selling Security Holders that during the time they
are engaged in distribution of the securities covered by this Prospectus, they
must comply with Rule 10b-5 and Regulation M under the Exchange Act. In addition
they have been advised that they:
o Cannot engage in any stabilization activity in connection with
our securities.
o Must furnish each broker through which securities covered by
this Prospectus may be offered the number of copies of this
Prospectus that are required by each broker.
o Must not bid for or purchase any of our securities.
o Must not attempt to induce any person to purchase any of our
securities other than as permitted under the Exchange Act
Release 34-38067 (December 20, 1996).
o Must coordinate their sales under this Prospectus with each
other and Us for purposes of Regulation M.
The Shares are being offered on a continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended. This offering for Selling Security
Holders will terminate on the earlier of:
o The date on which such Selling Security Holders' shares may be
resold pursuant to Rule 144 under the Securities Act.
o The date on which all Shares offered hereby have been sold by
the Selling Security Holder.
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<PAGE>
There can be no assurance that the Selling Security Holder will sell
any or all of the shares of common stock offered hereby.
The Selling Security Holder and any broker-dealers participating in the
distribution of the Shares may be "underwriters" within the meaning of the 1933
Act, and any commissions or discounts paid or given to any such broker-dealer
may be regarded as underwriting commissions or discounts under the 1933 Act.
17. LITIGATION
The Officers and Directors of the Company certify that to the best of
their knowledge, neither the Company nor any of its Officers and Directors are
parties to any legal proceeding or litigation. Further, the Officers and
Directors know of no threatened or contemplated legal proceedings or litigation.
None of the Officers and Directors have been convicted of a felony or none have
been convicted of any criminal offense, felony and misdemeanor relating to
securities or performance in corporate office. To the best of the knowledge of
the Officers and Directors, no investigations of felonies, misfeasance in office
or securities investigations are either pending or threatened at the present
time.
18. LEGAL MATTERS
Legal matters in connection with the Common Stock of the Company to be
issued in connection with the offering will be passed upon for the Company by
Allan M. Lerner, P.A.
19. EXPERTS
The financial statements of the Company appearing in this Prospectus
and the Registration Statement have been examined by the accounting firm of
P.S., Certified Public Accountants, 601 West Riverside Avenue, Suite 1940,
Spokane, Washington 99201, as indicated in its report contained herein. Such
financial statements are included in this Prospectus in reliance upon the said
report, given upon such firm's authority as an expert in auditing and
accounting.
20. ADDITIONAL INFORMATION
We have filed this Form S-1A Registration Statement with the Securities
and Exchange Commission, 450 Fifth Street, N.W. Washington D.C. 20549. This
Prospectus does not contain all of the information set forth in the registration
statement, exhibits, and schedules thereto. For further information with respect
to the Company, reference is made to the registration statement, exhibits and
schedules, copies of which may be obtained from the Commission's principals
officers in Washington, D.C., upon payment of the fees prescribed by the
Commission. For example, in this prospectus we've summarized or referred to some
contracts, agreements and other documents that have been filed as exhibits to
the registration statement. These exhibits along withe the registration
statement may be inspected at the SEC's offices, without charge and copies may
be obtained from
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<PAGE>
that office, upon payment of applicable fees. The registration statement,
including exhibits and schedules, are also available on the SEC's website at
www.sec.gov
We are subject to the information requirements of the Securities
Exchange Act of 1934, and accordingly will file reports and other information
with the SEC and are obtainable in the same manner as the registration
statement.
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<PAGE>
NEXLAND, INC. (Formerly, WindStar Resources, Inc.)
for the public offering for sale of 3,141,558 Shares of Common Stock
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction, or in any jurisdiction in
which the person making such offer or solicitation is not qualified to do so.
Until____________, 2000, (90 days after the date of this prospectus),
all dealers effecting transactions in registered securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to their unsold allotments or
subscriptions.
NEXLAND INC.
20801 Biscayne Blvd., Aventura, Florida 33180
(305) 937-3877
March , 2000
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses in connection with the issuance
and distribution of the shares being registered. All the amounts shown are
estimates, except the registration fee.
Registration Fee - SEC................$ 4,155.42
Printing and Engraving (EDGAR)........ --
Legal Fees and Disbursements..........$ 35,300.00
Accounting Fees.......................$ 24,500.00
Transfer Agent Fees...................$ 3,440.00
Blue Sky Fees and Expenses............
Selling Shareholders
Taxes, federal
Taxes and fees, state
TOTAL............................$
ITEM 14. Indemnification of Directors and Officers.
The only statutes, charter provisions, bylaws or other arrangements
under which any controlling person, Director or Officer of the
Registrant is insured or indemnified in any manner against liability
which he may incur in his capacity as such are set forth below.
The Arizona Revised Statutes provides for indemnification
where a person who was or is a party or is threatened to be
made a party to any threatened, pending or contemplated
action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in
right of a corporation), by reason of fact he is or was a
Director, Officer, employee or agent of a corporation or
serving another corporation at the request of the corporation,
against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement, actually and reasonably
incurred by him if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interest of the corporation and, with respect to criminal
action or proceeding, had no reasonable cause to believe his
conduct unlawful. Lack of good faith is not presumed from
settlement or nolo contendere plea. Indemnification of
expenses (including attorneys' fees) allowed in derivative
actions except in the case of misconduct in performance of
duty to corporation unless the Court decides indemnification
is proper. To the extent any such person succeeds on the
merits or otherwise, he shall be indemnified against expenses
(including
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<PAGE>
attorneys' fees). Determination that the person to be
indemnified met applicable standards of conduct, if not made
by the Court, is made by the Board of Directors by majority
vote of quorum consisting of the Directors not party to such
action, suit or proceeding or, if a quorum is not obtainable
or a disinterested quorum so directs, by independent legal
counsel or by the stockholders. Expenses may be paid in
advance upon receipt of undertakings to repay unless it shall
ultimately be determined that he is entitled to be indemnified
by the corporation.
The Corporation may purchase indemnity insurance. In so far as
indemnification for liability arising from the Securities Act
of 1933 may be permitted to Directors, Officers or persons
controlling the Company, it has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
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<PAGE>
ITEM 15. Recent Sales of Unregistered Securities.
The following table set forth information as to recent sales of the
Registrant's Common Stock since the for the past three years, all of
which shares were not registered under the Securities Act of 1933, as
amended:
<TABLE>
<CAPTION>
Amount of
Shares Consideration Date of
Name of Owner Acquired [1][2] Cash/Other Sale
------------- --------------- ---------- ----
<S> <C> <C> <C>
Fred R. Schmid 540,000 $ 10,000.00 11/17/97
136,422 [3] 11/17/99
70,000 [4] 11/17/99
160,000[9] 160,000.00 2/17/00
20,463 [5] 3/21/00
15,000 [6] 3/21/00
Erik Nelson 125,000 [7] 11/17/99
18,750 [5] 3/21/00
Brent Nygaard 15,000 [8] 11/17/99
Summit Capital Group 22,751 [8] 11/17/99
Baragan Mountain Mining,
LLC 22,000 [10] 6/18/98
BH Investor Group, LLC 12,611,250 [11] 11/17/99
Andre Chouraqui 5,044,500 [11] 11/17/99
Fast-Access Group, LLC 5,044,500 [11] 11/17/99
Broadband Investor Group,
LLC 2,602,500 [11] 11/17/99
High-Speed Venture, LLC 2,522,250 [11] 11/17/99
[1] Reflects the 1 for 250 share reverse stock split which occurred on
April 15, 1998.
[2] With respect to these shares of Common Stock issued by the Company,
the Company believes that these transactions did not involve any public
offering, in as much as all these shares were issued to the Company's
officers, directors and others, who purchased the shares for investment
purposes only and not with a view to further public distribution.
Further, no advertising of any nature was made in connection with the
sale of said shares, all Company information was made available to said
purchasers, and said purchasers were required to execute a subscription
agreement restating the
</TABLE>
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<PAGE>
aforementioned, among other things. Accordingly, the Company believes
that the transactions were exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
[3] These shares were issued to Fred R. Schmid as president of
Windstar Resources, Inc. in lieu of past due wages and interest, of
equal value, pursuant to the terms of the November 17, 1999
acquisition agreement between Windstar Resources, Inc. and Nexland,
Inc., on the basis of $1.00 per share.
[4] These shares were issued to Fred R. Schmid in lieu of consulting
fees due him under a April 1999 Consulting Agreement with Windstar, by
the terms of the November 17, 1999 acquisition agreement between
Windstar Resources, Inc. and Nexland, Inc., on the basis of $1.00 per
share.
[5] These shares result from the 5% penalty clause in the November 17,
1999 Acquisition Agreement between Windstar and Nexland due to the
filing of this post-effective amendment after the agreed upon date.
[6] These shares were issued to Fred R. Schmid as compensation
pursuant to the terms of the November 17, 1999 Consulting Agreement
with the Company.
[7] These shares were issued to Erik Nelson pursuant to the terms of
the November 17, 1999 acquisition agreement between Windstar
Resources, Inc. and Nexland, Inc. as payment for a finder's fee in
connection with the Nexland acquisition.
[8] These shares were issued to Brent Nygaard and Summit Capital Group
to retire to Company's promissory note obligation plus interest in
lieu of payment, on the basis of $1.00 per share.
[9] These shares were issued to Fred R. Schmid, upon the exercise of
options issued to him pursuant to an November 1997 option agreement,
at the exercise price of $1.00 per share.
[10] These shares were issued to Baragan Mountain Mining in lieu of
unpaid royalty fees plus accrued interest.
[11] These 29,500,000 shares were issued to Nexland Fla. shareholders
in connection with the November 17, Acquisition Agreement in exchange
for all outstanding Nexland Fla. shares. The market value of the
Company's common stock on the effective date of the merger was $0.3125
per share or a value of $921,875 plus liabilities of $82,551 or a total
of $1,004,426.
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<PAGE>
ITEM 16. Exhibits.
(a) Exhibits
The following documents are incorporated herein be reference from the
Registrant's Form S-1 Registration Statement filed with the Securities and
Exchange Commission (the "Commission"), Commission file #333-3074 on April
1, 1996 and declared effective by the Commission August 16, 1996:
Number Document
3.1 Articles of Incorporation.
3.2 Amended Articles of Incorporation.
3.3 Bylaws of the Company.
4.1 Specimen certificate for Common Stock.
4.2 Specimen certificate for Class A Redeemable Warrants.
4.3 Specimen certificate for Class B Redeemable Warrants.
The following documents are incorporated herein be reference from the
Registrant's Form 10-K Annual Report for the period ended December 31,
1997:
99.1 Stock Purchase Agreement.
99.2 Employment Agreement with Fred Schmid.
The following documents are incorporated herein be reference from the
Registrant's Form 10-K Annual Report for the period ended December 31, 1998:
3.3 Amended Articles of Incorporation dated December 31, 1997.
3.4 Amended Articles of Incorporation dated April 15, 1998.
-67-
<PAGE>
The following documents are incorporated herein be reference from the
Registrant's Post Effective Amendment 1 to Form S-1 Registration Statement filed
with the Securities and Exchange Commission (the "Commission"), Commission file
#333-3074 on June 17,1998 and declared effective by the Commission June 19,1998:
3.3 Amended Articles of Incorporation dated December 31, 1997.
3.4 Amended Articles of Incorporation dated April 15, 1998.
The following documents are incorporated herein be reference from the
Registrant's Form 8-K Report filed on December 3, 1999:
2. Acquisition Agreement and Exhibits attached thereto
The following exhibits are being filed herewith:
27 Financial Statements December 31, 1999, 1998 and 1997
10.1 March 14, 2000, Consulting Agreement between Nexland S.A. and the
Company
10.2 November17, 2000 Mutual Non-Competition Agreement between Nexland S.A.
and the Company
10.3 November 17, 1999, Co-operation Agreement between Smerwick Ltd, and the
Company
5. Consent and Opinion of Allan M. Lerner, P.A.
23 Consent of Allan M. Lerner. P.A. (contained in Exhibit 5)
23.1 Consent of Williams & Webster, P.S., CPA
99.3 November 17,1999, Executive Compensation Agreement between Gregory
Scott Levine and the Company
All other schedules and exhibits are omitted, as the required information
is not applicable or is not present in amount sufficient to require submission
of the schedule or because the information required is included in the financial
statements and notes thereto.
ITEM 17. Undertakings.
A. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made,
a post effective amendment to this registration statement:
a. To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
b. To reflect in the prospectus any facts or events arising after the
effective date of the
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<PAGE>
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
c. To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Insofar as indemnification for liabilities arising under the securities
Act of 1933 may be permitted to Directors, Officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, Officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by a
Director, Officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and shall be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing of this Post-Effective Form S-1 Registration Statement
and has duly caused this Post-Effective Form S-1 Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Miami, Florida on the 29 day of March, 2000
NEXLAND INC.
(formerly, Windstar Resources, Inc., formerly
Turtleback Mountain Gold Co., Inc.)
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<PAGE>
BY:/s/_____________________
Gregory Scott Levine
President and Director
BY:/s/_____________________
Richard G. Steeves, Director
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Gregory Scott Levine as his true and lawful
attorney-in-fact and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendment
(including post-effective amendments) to this registration statement, and to
file the same, therewith, with the Securities and Exchange Commission, and to
make any and all state securities law or blue sky filings, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying the confirming all that said attorney-in-fact and agent, or any
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the S-1 Registration Statement has been signed by
the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title
Date
<S> <C> <C>
Gregory Scott Levine Chairman of the Board of Directors; President
Richard G. Steeves Member of the Board of Directors; Secretary
</TABLE>
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<PAGE>
NEXLAND, INC.
Financial Statements
December 31, 1999,
1998 and 1997
WILLIAMS & WEBSTER, P.S.
Certified Public Accountants
Bank of America Financial Center
W. 601 Riverside, Suite 1940
Spokane, WA 99201
(509) 838-5111
<PAGE>
NEXLAND, INC.
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
NOTES TO FINANCIAL STATEMENTS 6
SUPPLEMENTAL INFORMATION 14
<PAGE>
[LETTERHEAD]
Williams & Webster, P.S.
Board of Directors
Nexland, Inc.
Miami, Florida
Independent Auditor's Report
----------------------------
We have audited the accompanying balance sheets of Nexland, Inc. as of December
31, 1999, 1998 and 1997 and the related statements of operations and
stockholders' equity, and cash flows, for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with 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 financial statements referred to above present fairly, in
all material respects, the financial position of Nexland, Inc. as of December
31, 1999, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 17 to the
financial statements, the Company's significant losses raise substantial doubt
about its ability to continue as a going concern. Management's plans regarding
the resolution of this issue are also discussed in Note 17. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The proforma financial statements on
pages 15 through 17 are presented for purposes of additional analysis and are
not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Williams & Webster, P.S.
- ----------------------------
Williams & Webster, P.S.
Spokane, Washington
March 13, 2000
1
<PAGE>
NEXLAND, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31, December 31,
A S S E T S 1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 4,231 $ - $ -
Accounts receivable 78,597 - -
Receivable from affiliated partnership - 2,900 2,900
Inventory 56,467 - -
Investment in Nexland LP - 100 100
------------- ------------ ------------
TOTAL CURRENT ASSETS 139,295 3,000 3,000
------------- ------------ ------------
PROPERTY AND EQUIPMENT
Furniture and equipment 8,434 - -
Less: accumulated depreciation (3,659) - -
------------- ------------ ------------
TOTAL PROPERTY AND EQUIPMENT 4,775 - -
------------- ------------ ------------
OTHER ASSETS
Escrow and security deposits 3,180 - -
Trademarks, net of amortization 1,320,246 - -
------------- ------------ ------------
TOTAL OTHER ASSETS 1,323,426 - -
------------- ------------ ------------
TOTAL ASSETS $ 1,467,496 $ 3,000 $ 3,000
============= ============ ============
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 196,061 $ - $ -
Accrued expense 53,939 - -
Notes payable 19,553
------------- ------------ ------------
TOTAL CURRENT LIABILITIES 269,553 - -
------------- ------------ ------------
LONG-TERM LIABILITIES
Notes payable, related parties 201,917 - -
------------- ------------ ------------
TOTAL LIABILITIES 471,470 - -
------------- ------------ ------------
COMMITMENTS AND CONTINGENCIES - - -
------------- ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized,
$0.0001 par value; no shares outstanding - - -
Common stock, 50,000,000 shares authorized,
$0.0001 par value; 34,094,703, 4,425,000
and 4,425,000 issued and outstanding, respectively 3,410 443 443
Additional paid-in capital 1,026,016 2,557 2,557
Accumulated deficit (33,400) - -
------------- ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 996,026 3,000 3,000
------------- ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,467,496 $ 3,000 $ 3,000
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
2
<PAGE>
NEXLAND, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Year Year
Ending Ending Ending
December 31, December 31, December 31,
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
R E V E N U E S $ 67,057 $ - $ -
COST OF REVENUES 34,175 - -
-------------- ------------ -----------
GROSS PROFIT 32,882 - -
-------------- ------------ -----------
E X P E N S E S
Advertising 200 - -
Professional services 20,020 - -
Selling and administrative 44,356 - -
-------------- ------------ -----------
TOTAL OPERATING EXPENSES 64,576 - -
-------------- ------------ -----------
OTHER INCOME AND (EXPENSE)
Interest (1,706) - -
-------------- ------------ -----------
NET LOSS BEFORE INCOME TAXES (33,400) - -
INCOME TAXES - - -
-------------- ------------ -----------
NET LOSS $ (33,400) $ - $ -
============== ============ ===========
Basic and diluted loss per common share $ nil $ nil $ nil
============== ============ ===========
Basic and diluted weighted average number of
common stock shares outstanding $ 11,652,143 $ 4,425,000 $ 4,425,000
============== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
NEXLAND, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Total
Number Additional Accumulated Stockholders'
of Shares Amount Paid-in Capital Deficit Equity
--------- ------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock in December, 1997
for cash at $1.00 per share 4,425,000 $ 443 $ 2,557 $ - $ 3,000
Income (Loss) for year ending December, 1997 - - - - -
---------- -------- --------- ---------- ----------
Balance at December 31, 1997 4,425,000 443 2,557 - 3,000
Income (Loss) for year ending December, 1998 - - - - -
---------- -------- --------- ---------- ----------
Balance at December 31, 1998 4,425,000 443 2,557 - 3,000
Stock exchanged for the acquisition of
Nexland LP 25,075,000 2,508 14,492 - 17,000
Stock exchanged in reverse acquisition of
Windstar Resources, Inc. by Nexland Inc. 4,594,703 459 1,008,967 - 1,009,426
Net loss for year ending December 31, 1999 - - - (33,400) (33,400)
---------- -------- --------- ---------- ----------
Balance at December 31, 1999 34,094,703 $ 3,410 $1,026,016 $ (33,400) $ 996,026
========== ======== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
NEXLAND, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Year Year
Ending Ending Ending
December 31, December 31, December 31,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (33,400) $ - $ -
Adjustments to reconcile net loss
to net cash provided (used) by operating activities:
Depreciation and amortization 8,292 - -
Decrease (Increase) in:
Accounts receivable (25,608) - -
Inventory 34,071
Increase (Decrease) in:
Accrued expenses 6,724 - -
----------------- ----------------- -----------------
Net cash used by operating activities (9,921) - -
----------------- ----------------- -----------------
Cash flows from investing activities:
Loans to Nexland LP - - (2,900)
Investment in Nexland LP - - (100)
----------------- ----------------- -----------------
Net cash used by investing activities - - (3,000)
----------------- ----------------- -----------------
Cash flows from financing activities:
Proceeds from common stock issued - - 3,000
Acquisition of Nexland LP 12,476 - -
Reverse acquisition of Wingstar Resources, Inc. 1,675 - -
----------------- ----------------- -----------------
Net cash provided by financing activities 14,151 - 3,000
----------------- ----------------- -----------------
Net increase (decrease) in cash 4,230 - -
Cash, beginning of period - - -
----------------- ----------------- -----------------
Cash, end of period $ 4,230 $ - $ -
================= ================= =================
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest expense - - -
================= ================= =================
Income taxes - - -
================= ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 1 - BUSINESS ORGANIZATION
Nature of Operations
- --------------------
Nexland, Inc. (hereinafter "Nexland") was incorporated on December 4, 1994 under
the laws of the State of Florida. From inception until November 17, 1999,
Nexland was inactive. On November 15, 1999, the partners of Nexland Limited
Partnership assigned all rights, title and interest in partnership assets to
Nexland, Inc. in exchange for 17,000 common stock shares of Nexland, Inc.
Nexland LP was formed on September 25, 1997. The activities of the Partnership
are reflected in the proforma financial statements. The Company is engaged in
the production of internet sharing boxes.
Subsequent to November 17, 1999, Nexland, Inc. exchanged its stock in a
merger-acquisition with Windstar Resources, Inc. See Note 9.
WindStar Resources, Inc. ("the Company") was incorporated on March 22, 1995,
under the laws of the State of Arizona under the name of Turtleback Mountain
Gold Co., Inc. to conduct business in the fields of mineral exploration,
construction and mining. WindStar Resources, Inc. has been in development stage
since inception and had not realized any significant revenues from its planned
operations. At November 17, 1999, WindStar Resources, Inc. discontinued all
mineral exploration, construction and mining operations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
- -------------------
Nexland uses the accrual basis of accounting in accordance with generally
accepted accounting principles.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Advertising
- -----------
Advertising costs are charged to operations in the year incurred.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment is recorded at cost and depreciated using the
straight-line method over estimated useful lives of three to seven years.
Expenditures for repairs and maintenance which do not extend the useful life of
the related asset are expensed as incurred.
6
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-lived Assets
- -------------------------------
The Company evaluates the recoverability of long-lived assets when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
Income Taxes
- ------------
No provision for taxes or tax benefit has been reported in the financial
statements, as there is not a measurable means of assessing future profits or
losses.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments with a maturity of three
months or less at the date of acquisition to be cash equivalents.
Basic and Diluted Earnings Per Share
- ------------------------------------
In December 1997, the Company adopted Statement of Financial Accounting
Standards Statement (SFAS) No. 128, Earnings Per Share. Basic earnings per share
is computed using the weighted average number of common shares outstanding.
Diluted net loss per share is the same as basic net loss per share as the
inclusion of common stock equivalents would be antidilutive.
Revenue and Cash Recognition
- ----------------------------
Revenues and cost of revenues are recognized when services and products are
furnished or delivered.
Intangibles
- -----------
Intangible assets consist of trademarks pending. Trademarks are amortized using
a straight-line method over twenty years.
Reclassifications
- -----------------
Certain amounts from prior periods have been reclassified to conform with the
current period presentation. This reclassification has resulted in no changes to
the Company's accumulated deficit or net losses presented.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets. The Company
evaluates the recoverability of property and equipment when events and
circumstances indicate that such assets might be impaired. The Company
determines impairment by comparing the undiscounted future cash flows estimated
to be generated by these assets to their respective carrying amounts.
7
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 3 - PROPERTY AND EQUIPMENT (Continued)
Major additions and betterments are capitalized. Costs of maintenance and
repairs which do not improve or extend the lives of the respective assets are
expensed as incurred. When property and equipment are retired or otherwise
disposed of, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is recognized in operations.
NOTE 4 - INVENTORY
Inventories are stated at the lower of cost or market, with cost being
determined on a first-in-first out basis.
Inventories at December 31, 1999 consist of finished goods. The Company had no
inventories at December 31, 1998 or 1997.
NOTE 5 - LEASE COMMITMENT
Nexland leases commercial office space in Miami, Florida on a month-to-month
agreement. The monthly rent is $3,000. The Company is currently negotiating a
lease for a new location.
NOTE 6 - INTANGIBLE ASSETS
On November 15, 1999, trademarks totaling $211,562 were transferred from Nexland
LP to the Company in connection with the transfer of Partnership assets to the
Company. The amount of $211,562 represents the excess of fair market value of
assets transferred over the related liabilities.
On November 17, 1999, Windstar Resources, Inc acquired Nexland, Inc. in a
reverse acquisition accounted for as a purchase. The purchase price exceeded the
net assets of Windstar at the date of acquisition by $1,116,976. This excess was
assigned to trademarks. Trademarks will be capitalized and amortized using the
straight-line method over twenty years. Amortization of trademarks was $8,292
for the year ended December 31, 1999.
At December 31, 1999, the Company's trademark applications were still pending
approval.
NOTE 7 - NOTES PAYABLE, RELATED PARTIES
Nexland has unsecured cash loans with a shareholder in the amount of $174,318 at
December 31, 1999. The notes bear interest equal to the applicable federal rate,
which is 5.83%, are unsecured and are subject to adjustment on August 1, 2000.
The terms of the notes were not finalized until after the merger with Winstar
Resources, Inc. See Note 9.
Other long-term debt at December 31, 1999 consists of an unsecured note with
Phoenix International Mining, Inc., a related party, dated August 1, 1997, with
interest due at 1% per
8
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 7 - NOTES PAYABLE, RELATED PARTIES (Continued)
month and the principal payable at the discretion of Windstar Resources, Inc.
with any remaining principal due not later than five years from the date of the
note. Under terms of the note, the Company may borrow from time to time in
varying amounts up to the sum of one million dollars within the two years from
the date of the note. The balance due at December 31, 1999, was $27,600.
NOTE 8 - NOTES PAYABLE
All Company notes are short-term, unsecured demand notes with an interest rate
of 12% per annum. The balance on these notes at December 31, 1999 is $19,553.
NOTE 9- PREFERRED STOCK
The Company has the authority to issue 10,000,000 shares of preferred stock,
having a par value of $0.0001 per share. At December 31, 1999 no shares of
preferred stock were outstanding.
NOTE 10 - COMMON STOCK
On November 17, 1999 Nexland, Inc. exchanged each of its shares of common stock
for 1,475 shares of Windstar Resources, Inc. common stock shares. Nexland,
Inc.'s shareholders received 29,500,000 shares of Windstar Resources, Inc.
common stock in exchange for their 20,000 share of Nexland's common stock. The
market value of the common shares of Windstar as of the effective merger date
was $0.03125 per share resulting in a value of $921,875. Furthermore, Nexland
contributed $25,000 in cash for the payment of Windstar's outstanding payables
and assumed $82,551 of the net liabilities of Windstar. The shareholders of
Windstar Resources, Inc. retained their 4,594,703 shares of common stock. The
Company has 34,094,703 shares of common stock outstanding at December 31, 1999.
Mr. Israel D. Sultan, the original shareholder of Nexland, was issued 3,000
shares of no par common stock for his original capital contribution of $3,000.
On November 15, 1999, Nexland LP was acquired for the issuance of 17,000 shares
of common stock which were valued at $211,562. This transaction which included
the assumption of net debt of Nexland LP of $194,461 and the issuance of common
stock valued at $17,000, was in addition to Nexland, Inc's. original investment
in Nexland LP of $101.
Windstar Resources, Inc., the Company predecessor by reverse acquisition, had
during the year ended December 31, 1995, issued 310,000,000 shares of common
stock in exchange for eight mining claims. The stock was issued at $0.000042 per
share.
9
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 10 - COMMON STOCK (Continued)
During the year ended December 31, 1996, Windstar issued 400,000,000 units in
exchange for one hundred twenty eight mining claims (Note 3). Each unit
consisted of one share of common stock, one "Class A Warrant" and one "Class B
Warrant". The stock was issued at $0.000165 per share. See Note 5.
During the year ended December 31, 1998, the Board of Directors of Windstar
authorized a 1-for-250 reverse stock split, thereby decreasing the number of
issued and outstanding shares and increasing the par value of each share to
$0.0001. All references in the accompanying financial statements to number of
common shares and per share amounts for 1998 and 1999 have been restated to
reflect the reverse stock split.
Windstar issued 22,000 shares of its common stock during the year ended December
31, 1998, in payments of outstanding debt that was owed to Baragan Mountain
Mining, LLC for an unpaid royalty fee and the interest accrued. The shares were
issued at $2.50 per share.
In November 1999, 382,173 shares of common stock were issued to related parties
in payment of debt.
In consideration of Nexland S.A. granting a right of first refusal for purchase
of Nexland S.A., to Nexland, Inc., certain Nexland stockholders conveyed
1,584,000 shares of common stock they received out of the 29,500,000 shares of
common stock to Nexland S.A. for distribution to Nexland S.A. shareholders. See
Note 15.
On November 17, 1999 the Company committed to a consulting agreement with Fred
Schmid, a related party. This agreement provides for compensation to be paid in
common stock at 5,000 shares per month issued quarterly. This agreement can be
terminated at any time by either party.
NOTE 11 - STOCK WARRANTS
During the year ended December 31, 1996, the Company issued 400,000,000 units.
As stated in Note 10, each unit consisted of one share of common stock, one
"Class A Warrant" and one "Class B Warrant". Each "Class A Warrant" may be
exercised to purchase one share of common stock at an exercise price of $0.01.
Each "Class B Warrant" may be exercised to purchase one share of common stock at
an exercise price of $0.02. The warrants are redeemable at any time upon the
Company giving thirty days written notice to the holder thereof at redemption
price of $0.00001 per warrant. The warrants are exercisable up to five years
from the effective date of the offering unless called sooner.
During the year ended December 31, 1998, the Board of Directors voted to reduce
the warrants authorized and outstanding based on a 1 for 250 shares reverse
split. This reduced the authorized and outstanding "Class A Warrants" to
1,600,000 which exercisable to purchase 1,600,000
10
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 11 - STOCK WARRANTS (Continued)
shares of the company's common stock at prices ranging from $0.25 to $2.50 and
the authorized and outstanding "Class B Warrants" to 1,600,000 which exercisable
to purchase 1,600,000 shares of the company's common stock at $5.00. As of
December 31, 1999, 1,541,558 "Class A Warrants" remain authorized and
outstanding (not exercised). No "Class B Warrants" were exercised during 1997,
1998 or 1999.
NOTE 12 - SALE OF STOCK AND GRANT OF OPTIONS
The Company sold 135,000,000 shares of common stock to its president and chief
executive officer for $10,000 cash and also granted purchase options to him
during November 1997. The Company's options ("Stock Options") enable the holder
to purchase up to 40,000,000 shares of the stock during the ten-year period
commencing on the second anniversary of the date of this agreement for the
exercise price of $0.01 per share, and up to 40,000,000 additional shares of
stock during the ten-year period commencing on the third anniversary of the date
of this agreement for the exercise price of $0.02 per share. This agreement was
dated November 11, 1997.
During the year ended December 31, 1998, based on a 1-for-250 reverse stock
split, the Board of Directors reduced these stock options to 160,000 shares
during the ten-year period commencing on the second anniversary of the date of
this agreement at an exercise price ranging from $0.25 to $2.50 per share and
160,000 additional shares of stock during the ten-year period commencing on the
third anniversary of the date of this agreement at an exercise price of $5.00
per share. No options were granted or exercised during 1998 or 1999.
Following is a summary of the status of fixed options outstanding at December
31, 1998, and December 31, 1999:
Weighted
Exercise Average Remaining Weighted Average
Price Range Number Contractual Life Exercise Price
-------------- ------- ---------------------- ------------------
$0.25 to $5.00 320,000 5-10 years $3.875
Of the 320,000 options referred to above, 160,000 are exercisable beginning
November 11, 1999. The remaining 160,000 options are not exercisable until
November 11, 2000. The Company estimates that substantially all of these options
will be exercised during the contractual period.
11
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 13 - YEAR 2000
Like other companies, Nexland could be adversely affected if the computer
systems it, its suppliers or customers use do not properly process and calculate
date-related information and data from the period surrounding and including
January 1, 2000. This is commonly known as the "Year 2000" issue. Additionally,
this issue could impact non-computer systems and devices such as production
equipment, elevators, etc.
The Company has reviewed its business and processing systems and believes that
the majority of its systems are already Year 2000 compliant or can be made so
with software updates. Based on preliminary assessments, the Company regards the
costs associated with Year 2000 readiness to be immaterial.
NOTE 14 -MERGER /ACQUISITION
The acquisition transactions were used to establish the value of trademarks for
the consolidated company in the proforma filings required by reporting standards
of the Securities and Exchange Commission. As part of the transaction, Nexland,
Inc. agreed to pay $25,000 in debts owed to certain creditors of Windstar
Resources, Inc. See Note 6.
In connection with this transaction, the Company acquired liabilities of $82,551
in excess of Windstar's assets and the Company also adjusted equity and
investments. In the reverse acquisition Nexland acquired $1,675 in cash and
$84,226 in liabilities from Windstar. The value of trademarks was increased by
$1,116,976 in the valuation of the components of the acquisitions. See Note 6.
Nexland was wholly merged into Windstar Resources, Inc. Windstar Resources, Inc.
subsequently changed its name to Nexland, Inc.
NOTE 15 - ACQUISITION OPTION FOR NEXLAND S.A.
Nexland, Inc. has the option to purchase all common stock shares of Nexland
S.A., a French corporation. This option expires on June 30, 2000. The purchase
price is contingent upon a valuation to be performed by an independent French
accounting firm. See Note 10.
NOTE 16 - MINERAL PROPERTIES
Eight mining claims were transferred to the Company on June 30, 1995 by
quitclaim deed in exchange for 310,000,000 shares of common stock. The mining
claims were reflected in the balance sheet at the transferor cost of $13,000.
During the year ended December 31, 1999, the Company allowed these claims to
expire resulting in a charge against operations in the amount of $13,000.
12
<PAGE>
NEXLAND, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1999,
1998 and 1997
NOTE 16 - MINERAL PROPERTIES (Continued)
One hundred twenty-eight mining claims located in the La Paz, Maricopa, and Yuma
counties of Arizona were transferred to the Company on November 16, 1996, by
quitclaim deed in exchange for 400,000,000 units as explained in Note 5. During
the year ended December 31, 1999, the Company allowed these claims to expire
resulting in a charge against operations in the amount of $66,076.
The four Red Raven II claims purchased from Maxam Gold Corporation have a
royalty fee clause attached to them. The royalty fee, payable to Baragan
Mountain Mining, LLC, is five percent of the net income from operations on the
claims or $50,000 annually (whichever is greater) beginning July 14, 1996.
During 1998, the Company settled a default on the $50,000 annual payment, which
was due July 14, 1997, by the exchange of 22,000 shares of its common stock.
This included $5,000 of interest, which had been accrued on the indebtedness. As
part of this settlement, the $50,000 annual fee has been rescinded and future
royalty fees will be calculated on 2.5% of net smelter return from production
from those claims, if any.
NOTE 17 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company and its
predecessor, Nexland LP, have generated no revenues before 1999. The predecessor
partnership had a net loss of $98,614 for 1999 at the time it was acquired by
the Company. Nexland, Inc. has an accumulated deficit of $34,000 at December 31,
1999.
Management believes that significant resources will be available from private
and public sources in 2000 to continue the marketing of its internet sharing
devices. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
offerings that will provide funds needed to increase liquidity, fund internal
growth and fully implement its business plan.
13
<PAGE>
NEXLAND, INC.
PROFORMA FINANCIAL INFORMATION
The following Proforma Combined Balance Sheet as of December 31, 1998 and
Proforma Combined Statements of Operations for the years ended December 31, 1999
and 1998 are audited. These proforma financial statements relate to the reverse
acquisition of Windstar Resources, Inc. by Nexland, Inc. Windstar Resources,
Inc., (subsequently renamed Nexland, Inc.) issued 29,500,000 shares of common
stock for 100% of the outstanding common stock of Nexland, Inc. on November 17,
1999.
The proforma financial information has been prepared utilizing the historical
financial statements of Windstar Resources, Inc. and Nexland, Inc. and its
predecessor, Nexland LP, and should be read in conjunction with the separate
historical financial statements and notes thereto of these companies for the
respective periods presented.
The proforma financial information is based on the purchase method of accounting
and the acquisition as a reverse acquisition with the surviving company being
the operating company, Nexland, Inc., previously Nexland, LP. The Proforma
Combined Statements of Operations assume the acquisition had occurred at the
beginning of the period presented in the statements. All intercompany accounts
and transactions have been eliminated.
The proforma combined financial statements do not purport to be indicative of
the financial positions and results of operations and cash flows which actually
would have been obtained if the acquisition had occurred on the date indicated
or the results which may be obtained in the future. The disclosures concerning
the common stock and losses per share are reported based upon each entity's
share of the common stock at the acquisition date. Accordingly, amounts shown
for Nexland LP are based upon the stock allocated to its respective share of
Nexland, Inc.
14
<PAGE>
<TABLE>
<CAPTION>
NEXLAND, INC.
PROFORMA COMBINED STATEMENTS OF OPERATIONS
HISTORICAL PROFORMA
------------------------------------------------------------------------------------------
Nexland, Inc.
Windstar Resources, Inc November 15, 1999 Nexland, LP
January through through January through
November 17, 1999 December 31, 1999 November 15, 1999 Eliminations Total
----------------------- ----------------- ----------------- ------------ -----
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ 67,057 $ 196,281 - $ 263,338
COST OF REVENUES - 34,175 95,136 - 129,311
------------------ ----------------- ------------------ -------- -----------
GROSS PROFIT - 32,882 101,145 - 134,027
------------------ ----------------- ------------------ -------- -----------
EXPENSES
Advertising - 200 10,164 - 10,364
Professional services 158,714 20,020 15,492 - 194,226
Selling and administrative expenses 35,376 44,356 181,724 - 261,456
Mining claims 79,076 - - - 79,076
------------------ ----------------- ------------------ -------- -----------
TOTAL EXPENSES 273,166 64,576 207,380 - 545,122
------------------ ----------------- ------------------ -------- -----------
OPERATING INCOME (LOSS) (273,166) (31,694) (106,235) - (411,095)
OTHER INCOME (EXPENSE)
Other income - - - - -
Loss on sale of investments - - - - -
Interest expense (21,893) (1,706) - - (23,599)
------------------ ----------------- ------------------ -------- -----------
TOTAL OTHER INCOME (EXPENSE) (21,893) (1,706) - - (23,599)
INCOME (LOSS) BEFORE INCOME TAXES (295,059) (33,400) (106,235) - (434,694)
INCOME TAX BENEFIT - - - - -
------------------ ----------------- ------------------ -------- -----------
NET (INCOME) LOSS $ (295,059) $ (33,400) $ (106,235) - $ (434,694)
================== ================= ================== ======== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ nil $ nil $ nil - $ (0.01)
================== ================= ================== ======== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 4,213,230 4,425,000 25,075,000 - 33,713,230
================== ================= ================== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
15
<PAGE>
NEXLAND, INC.
PROFORMA BALANCE SHEETS
<TABLE>
<CAPTION>
Windstar
Resources, Inc. Nexland, Inc. Nexland, LP
A S S E T S December 31, 1998 December 31, 1998 December 31, 1998 Eliminations Total
----------------- ----------------- ----------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 1,744 $ - $ 23 $ - $ 1,767
Receivable from affiliated partner - 2,900 - (2,900) -
Inventory - - 7,643 - 7,643
Investment in Nexland LP - 100 - (100) -
--------------- --------------- --------------- ----------- ---------
TOTAL CURRENT ASSETS 1,744 3,000 7,666 (3,000) 9,410
--------------- --------------- --------------- ------------ ---------
PROPERTY AND EQUIPMENT
Furniture and equipment - - 6,183 - 6,183
Less: accumulated depreciation - - (1,943) - (1,943)
--------------- --------------- --------------- ------------ ---------
TOTAL PROPERTY AND EQUIPMENT - - 4,240 - 4,240
--------------- --------------- --------------- ------------ ---------
OTHER ASSETS
Organizatonal costs, net 274 - - - 274
Mining claims 79,076 - - - 79,076
Trademarks - - - - -
--------------- --------------- --------------- ------------ ---------
TOTAL OTHER ASSETS 79,350 - - 79,350
--------------- --------------- --------------- ------------ ---------
TOTAL ASSETS $ 81,094 $ 3,000 $ 11,906 $ (3,000) $ 93,000
=============== =============== =============== ============ =========
L I A B I L I T I E S & S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accounts payable $ 21,637 $ - $ 7,643 $ - $ 29,280
Accured expense 107,435 - 5,353 - 112,788
Notes payable 53,417 - - - 53,417
Notes payable, related parties 27,600 - 87,136 (2,900) 111,836
---------------- --------------- --------------- ------------ ---------
TOTAL CURRENT LIABILITIES 210,089 - 100,132 (2,900) 307,321
---------------- --------------- --------------- ------------ ---------
COMMITMENTS AND CONTINGENCIES - - - -
---------------- --------------- --------------- ------------ ---------
STOCKHOLDERS' EQUITY
Preferred stock - - - - -
Common stock 421 443 - - 864
Additional paid in capital 162,760 2,557 - - 165,317
Accumulated deficit (292,176) - (88,226) (100) (380,502)
---------------- --------------- --------------- ------------ ---------
TOTAL STOCKHOLDERS' EQUITY (128,995) 3,000 (88,226) (100) (214,321)
---------------- --------------- --------------- ------------ ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,094 $ 3,000 $ 11,906 $ (3,000) $ 93,000
================ =============== =============== ============ =========
</TABLE>
The accompanying notes are an integral part of these financial statements
16
<PAGE>
NEXLAND, INC.
PROFORMA COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
HISTORICAL PROFORMA
------------------------------------------------------------------------------------------
Windstar Resources,Inc Nexland, Inc. Nexland, LP
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1998 December 31, 1998 Eliminations Total
--------------------- ----------------- ----------------- ------------ --------
<S> <C> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ - $ -
COST OF REVENUES - - - - -
---------------- -------------- ------------- ---------- ---------
GROSS PROFIT - - - - -
---------------- -------------- ------------- ---------- ---------
EXPENSES
Advertising - - 3,354 - 3,354
Professional services 33,006 - 42,814 - 75,820
Selling and administrative expenses 112,021 - 53,734 - 165,755
---------------- -------------- ------------- ---------- ---------
TOTAL EXPENSES 145,027 - 99,902 - 244,929
---------------- -------------- ------------- ---------- ---------
OPERATING INCOME (LOSS) (145,027) - (99,902) - (244,929)
OTHER INCOME (EXPENSE)
Other income - - - - -
Loss on sale of investments - - - - -
Interest expense (15,637) - - - (15,637)
---------------- -------------- ------------- ---------- ---------
TOTAL OTHER INCOME (EXPENSE) (15,637) - - - (15,637)
INCOME (LOSS) BEFORE INCOME TAXES (160,664) - (99,902) - (260,566)
INCOME TAX BENEFIT - - - - -
---------------- -------------- ------------- ---------- ---------
NET (INCOME) LOSS $ (160,664) $ - $ (99,902) - $(260,566)
================ ============== ============= ========== =========
BASIC AND DILUTED LOSS PER COMMON
SHARE $ (0.04) $ nil $ nil - $ (0.01)
================ ============== ============= ========== =========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 4,162,223 4,425,000 25,075,000 - 33,662,223
================ ============== ============= ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
17
Law Offices
ALLAN M. LERNER
A Professional Association
Telephone: (954)563-8111
2888 East Oakland Park Boulevard Facsimile : (954)563-8522
Fort Lauderdale, Florida 33306 E.Mail : [email protected]
--------------
March 27, 2000
Nexland, Inc.
20801 Biscayne Boulevard
Suite 403
Aventura, Florida 33180
Re: Amendment No. 2 to Registration Statement on Form S-1
Gentleman:
This opinion is submitted pursuant to applicable rules of the Securities and
Exchange Commission with respect to the registration by Nexland, Inc. (the
"Company") of an aggregate of 3,602,193 shares of common stock $0.0001 par value
(the "Common Stock") pursuant to a Registration Statement on Form S-1.
In my capacity as securities counsel to Nexland, I have examined the original,
certified, conformed, or other copies of Nexland's Certificate of Incorporation,
Bylaws and other corporate minutes provided to me by Nexland. In all such
examinations, I have assumed the genuineness of all signatures on original
documents, and the conformity to originals or certified documents of all copies
submitted to me as conformed, Photostat or other copies. In passing upon certain
corporate records and documents of Nexland, I have necessarily assumed the
correctness and completeness of the statements made or included therein by
Nexland, and I express no opinion thereon. Based upon and in reliance of the
foregoing, I am of the opinion that the Common Stock has been and upon exercise
of the warrants will be upon issuance, validly issued, fully paid and
non-assessable. I hereby consent to the use of this opinion in the Registration
Statement on Form S-1 to be filed with the Commission.
/s/ Allan M. Lerner
-----------------------------
Allan M. Lerner
CONSULTING AGREEMENT
AGREEMENT, dated as of March 14, 2000 (the "Agreement"), by and between
Nexland, Inc., an Arizona corporation having its principal place of business at
20801 Biscayne Boulevard, Suite 414, Aventura, Florida 33180 (the "Company"),
and Nexland, S.A., a corporation formed under the laws of France (the
"Consultant").
WHEREAS, the Company desires to employ and retain the Consultant for
the term specified herein in order to advise and assist the Company in the
research, development, and maintenance of its products on the terms and
conditions set forth herein; and
WHEREAS, the Consultant desires to provide such services to the Company
in such capacities, on and subject to the terms and conditions hereof;
NOW, THEREFORE, the parties hereto (the "Parties" and each a "Party"),
intending to be legally bound, hereby agree as follows:
1. Engagement, Term and Representative.
-----------------------------------
1.1 Engagement. Subject to all of the terms and conditions hereof,
the Company does hereby engage the Consultant as its chief technical consultant,
for and during the Term, as defined below, and the Consultant does hereby accept
the position of chief technical consultant.
1.2 Term. The term of consultancy established hereby shall commence
on November 17, 1999, (the "Effective Date") and shall continue until December
31, 2005, unless earlier terminated as herein provided (such term, the "Term").
and thereafter shall be renewed for additional terms of one (1) year, unless
either party provides the other with notice, as provided for herein, at least
ninety (90) days prior to the date the Term would otherwise renew, of that
party's intention not to so renew such term.
1.3 Representative. Consultant shall supply Israel Daniel Sultan
("Sultan") as its representative to carry out the duties of Consultant as set
forth herein.
2. Duties of Consultant. The Consultant shall, during the Term, perform
technical consulting functions as the same may be determined by the Board of
Directors of the Company from time to time. The Consultant shall report to the
Board of Directors of the Company (or such person designated by the Board of
Directors). The Consultant agrees to serve the Company faithfully,
conscientiously and to the best of its ability so as to promote the profit,
benefit and advantage of the Company and, if applicable, any subsidiaries or
affiliates of the Company. The Consultant agrees
<PAGE>
to accept the payments to be made to it under this Agreement, as full and
complete compensation for the services required to be performed by, and the
covenants of, the Consultant under this Agreement.
3. Location and Travel. The Consultant shall provide consulting
services from its office or any other location of its choosing, provided that
the Consultant acknowledges that significant domestic and international travel
may be required as part of its duties hereunder, and the Consultant agrees to
undertake such travel as may be reasonably required by the business of the
Company from time to time.
4. Compensation.
-------------
4.1 Base Compensation. The Consultant shall be paid at an annual
rate of One Hundred Seventy Five Thousand ($175,000.00) Dollars ("Base
Compensation") beginning on the date that the Company shall have obtained equity
investment and/or debt financing totaling in the aggregate at least One Million
($1,000,000.00) Dollars. Company shall not be responsible for, nor shall it
withhold from the amounts paid to Consultant under this Agreement, any federal,
state, or local taxes of any kind (collectively referred to as "Taxes"),
provided, however, that Company shall withhold, if any, amounts required to be
withheld pursuant to the Internal Revenue Code (the "Code") by reason of
Consultant's foreign status.
4.2 Term Life Insurance. The Company shall have the right from time
to time to purchase, modify or terminate insurance policies on the life of
Sultan for the benefit of the Company in such amount as the Company shall
determine in its sole discretion. In connection therewith the Consultant shall,
at such time or times and at such place or places as the Company may reasonably
direct, submit Sultan to such physical examinations and execute and deliver such
documents as the Company may deem necessary or desirable; provided, however,
that the eligibility of Sultan for, or the availability of, such insurance shall
not be deemed to be a condition of continued engagement hereunder. The
Consultant makes no representation to the Company as to Sultan's current or
future eligibility for insurance.
4.3 Expense Reimbursement. The Company shall reimburse the
Consultant for all expenses reasonably incurred by it in connection with the
performance of its duties hereunder and the business of the Company upon the
submission to the Company of appropriate receipts therefor.
5. Termination and Severance Arrangements.
---------------------------------------
5.1 Termination by the Company. The Company may terminate this
Agreement at any time on or after December 31, 2001, by providing at least 30
days advance written notice to the Consultant. In the event that the Company
terminates this Agreement (a) on or after December 31, 2001, (b) other than in
connection with a Change of Control, in which event Section 6 shall
<PAGE>
apply, and (c) other than for Cause, in which event Section 5.3 shall apply, the
Company shall, notwithstanding such termination, in consideration for all of the
undertakings and covenants of the Consultant contained herein, continue to pay
to the Consultant the Base Compensation for twelve (12) months from the date of
such termination.
5.2 Termination by Consultant. The Consultant may terminate this
Agreement at any time on or after December 31, 2000, by providing at least 180
days advance written notice to the Company.
5.3 Termination for Cause. Notwithstanding the Employment Term, the
Company may terminate the Consultant for Cause, as defined below, upon a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board of Directors at a meeting called and held for
such purpose (after reasonable notice to the Consultant and an opportunity for
the Consultant, together with its counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the Board of Directors
there shall have been Cause, as defined below, to terminate the Consultant and
specifying the particulars thereof in detail. In the event that the employment
of the Consultant is terminated by the Company for Cause, no severance or other
post-termination payment shall be due or payable by the Company to the
Consultant (except solely such bonus or other payments as may have been accrued
but not yet paid prior to such termination). For purposes hereof, "Cause" shall
mean: (a) the conviction or entry of a plea of guilty or no contest, with
respect to any felony, or misdemeanor involving theft, fraud, dishonesty or
misrepresentation; (b) any material misappropriation, embezzlement or conversion
of the Company's or any of its subsidiary's or affiliate's property by the
Consultant; (c) willful misconduct by the Consultant in respect of the material
duties or obligations of the Consultant under this Agreement; or (d) a material
breach by the Consultant of any of its material obligations hereunder, after
written notice thereof and a reasonable opportunity of thirty (30) days to cure
the same, provided that the same is not caused by the physical disability
including mental disease or defect of Sultan, in which event Section 6.4 shall
apply.
5.4 Death or Disability. In the event that the engagement of the
Consultant by the Company is terminated by reason of the death of Sultan or by
reason of the medical or psychiatric disability of Sultan to perform a material
portion of his duties for ninety (90) consecutive calendar days (a
"Disability"), the Company shall, promptly upon such termination, pay the
Consultant an amount equal to six (6) months of Base Compensation, in a single
lump sum.
6. Parachute Provisions.
---------------------
6.1 Change of Control. For purposes of this Agreement, a "Change of
Control" shall be deemed to have occurred upon the occurrence of any one or more
of the following events.
<PAGE>
6.1.1 Any "person" or "group" (as such terms are used in
connection with Section 13(d) and 14(d)(2) of the Securities Exchange Act of
1934 (the "Exchange Act")) but excluding the Consultant or any employee benefit
plan of the Company (a) is or becomes the "beneficial owner" (as defined in Rule
l3d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the combined voting power of
the Company's outstanding securities then to vote for the election of directors,
or (b) acquires by proxy or otherwise fifty percent (50%) or more of the
combined voting securities of the Company having the right to vote for the
election of directors of the Company, for any merger or consolidation of the
Company, or for any other matter; provided, however, that a Change of Control
shall not be deemed to have occurred solely by reason of the public ownership of
fifty percent (50%) or more of the Common Stock of the Company;
6.1.2 There shall be consummated without the consent of the
Consultant (A) any consolidation, merger or recapitalization of the Company or
any similar transaction involving the Company, whether or not the Company is the
continuing or surviving corporation, (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all of the assets of the Company or (C) the adoption of a plan of
complete liquidation of the Company (whether or not in connection with the sale
of all or substantially all of the Company's assets) or a series of partial
liquidations of the Company that is de jure or de facto part of a plan of
complete liquidation of the Company; provided that the divestiture of less than
substantially all of the assets of the Company in one transaction or a series of
related transactions, whether effected by sale, lease, exchange, spin-off, sale
of the stock or merger of a Subsidiary or otherwise, or a transaction solely for
the purpose of reincorporating the Company in another jurisdiction, shall not
constitute a "Change in Control."
6.2 Rights on Change in Control. If within one year after, or 90
days prior to, a Change in Control of the Company, the Company shall terminate
the Consultant's contract other than by reason of the Consultant's death or
Disability or for Cause, the Company shall pay to the Consultant as compensation
for services rendered, not later than the fifth business day after the date of
termination:
6.2.1 the Consultant's Base Compensation through the date of
termination; and
6.2.2 a lump sum termination fee equal to two (2) times the
Consultant's average annual compensation during the Base Period, as defined in
the Internal Revenue Code (the "Code") provided that in no event shall Total
Payments, as defined in the Code, exceed two (2) times the Consultant's Base
Amount as such term is defined in Section 28OG of the Code. The Consultant's
Base Amount shall be determined in accordance with temporary or final
regulations promulgated under Section 28OG of the Code then in effect, if any.
<PAGE>
7. Proprietary Rights.
-------------------
7.1 Non Competition. The Consultant covenants and agrees that for
so long as it shall be under contract with the Company, and for so long as the
Company shall make any severance payment due hereunder, and for a period of two
years from the later of the termination of such contract or the last such
severance payment (such period of time the "Restricted Period") the Consultant
shall not directly or indirectly, own, manage, control, operate, invest in or
become principal of, employee of, director of, or consultant to, any business,
entity or venture which is competitive with the business of the Company as
conducted at such time; provided, however, that it shall not be a violation of
this Agreement for Sultan to (i) have beneficial ownership of less than 5% of
the outstanding amount of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such securities
are listed on a national securities exchange or quoted on an inter-dealer
quotation system, or (ii) to continue to maintain an ownership interest in, and
provide services to, Nexland, S.A., an entity duly organized under the laws of
the country of France, but only so long as a non-competition agreement remains
in effect between Nexland, S.A. and the Company.
7.2 Confidentiality. The Consultant recognizes and acknowledges
that certain confidential business and technical information used by the Sultan
in connection with his duties hereunder that includes, without limitation,
certain confidential and proprietary information relating to the designing,
development, construction and marketing of computer hardware, is a valuable and
unique asset of the Company. Consultant agrees that he shall at all times
maintain the confidentiality of the proprietary information and trade secrets of
the Company, and that it shall during the Restricted Period refrain from
disclosing any such information to the disadvantage of the Company.
7.2.1 During the Restricted Period the Consultant shall not,
directly or indirectly (A) solicit, in competition with the Company, any person
who is a customer of any business conducted by the Company, or (B) in any manner
whatsoever induce, or assist others to induce, any supplier of the Company to
terminate its association with such entity or do anything, directly or
indirectly, to interfere with the business relationship between the Company, and
any of their respective current or prospective suppliers.
7.2.2 During the Restricted Period the Consultant shall not,
directly or indirectly, solicit or induce any employee of the Company to
terminate his or her employment for any purpose, including without limitation,
in order to enter into employment with any entity which competes with any
business conducted by the Company
7.3 Ownership by Company. The Consultant acknowledges and agrees
that all of its work product created, produced or conceived in connection with
its association with the Company shall be deemed "work for hire" and shall be
deemed to be owned exclusively by the
<PAGE>
Company. The Consultant agrees to execute and deliver all documents required by
the Company to document or perfect the Company's proprietary rights in and to
the Consultant's work product.
7.4 Remedies. It is expressly understood and agreed that the
services to be rendered hereunder by the Consultant are special, unique, and of
extraordinary character, and in the event of the breach by the Consultant of any
of the terms and conditions of this Agreement on its part to be performed
hereunder, or in the event of the breach or threatened breach by the Consultant
of the terms and provisions of this Section 9 of this Agreement, then the
Company shall be entitled, if it so elects, to institute and prosecute any
proceedings in any court of competent jurisdiction, either in law or equity, for
such relief as it deems appropriate, including without limiting the generality
of the foregoing, any proceedings, to obtain damages for any breach of this
Agreement, or to enforce the specific performance thereof by the Consultant.
7.4.1 Neutral Construction. Neither Party may rely on any drafts of
this Agreement in any interpretation of the Agreement. Each Party to this
Agreement has reviewed this Agreement and has participated in its drafting and,
accordingly, neither Party shall attempt to invoke the normal rule of
construction to the effect that ambiguities are to be resolved against the
drafting party in any interpretation of this Agreement.
7.4.2 Attorney's Fees. In the event that either Party hereto
commences litigation against the other to enforce such party's rights hereunder,
the prevailing party shall be entitled to recover all costs, expenses and fees,
including reasonable attorneys' fees (including in-house counsel), paralegals',
fees, and legal assistants' fees through all appeals.
8. General.
--------
8.1 No Brokers. Each of the Parties represents and warrants to the
other that it has not utilized the services of any finder, broker or agent. Each
of the Parties agrees to indemnify the other against any and all liabilities to
any person, firm or corporation claiming any fee or commission of any kind on
account of services rendered on behalf of such party in connection with the
transactions contemplated by this Agreement.
8.2 Applicable Law. This document shall in all respects be governed
by the laws of the State of Florida. The Parties acknowledge that substantially
all of the negotiations relating to this Agreement were conducted in Florida,
and that this Agreement has been executed by both Parties in Florida. Any legal
suit, action or proceeding against either Party arising out of or relating to
this Agreement shall be instituted in a federal or state court in the State of
Florida, and each Party waives any objection which it may now or hereafter have
to the laying of venue of any such suit, action or proceeding and each Party
irrevocably submits to the jurisdiction of any such court in any suit, action or
proceeding.
<PAGE>
8.3 Rights Absolute. The Company's obligation to pay the Consultant
the compensation specified herein shall be absolute and unconditional and shall
not be affected by any circumstance, including, without limitation, any setoff,
counterclaim, defense or other right which the Company may have against the
Consultant or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand.
8.4 No Offset. Except as expressly provided herein, the Company
waives all rights it my now have or may hereafter have conferred upon it, by
statute or otherwise, to terminate, cancel or rescind this Agreement in whole or
in part. The Consultant shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment, and if
Consultant obtains such other employment, any compensation earned by Consultant
pursuant thereto shall not be applied to mitigate any payment made to Consultant
pursuant to this Agreement.
8.5 Successor Obligations. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company to
expressly assume by written agreement and to agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place.
8.6 Survival. The Parties agree that the covenants contained in
Section 9 hereof shall survive any termination of employment by the Consultant
and any termination of this Agreement. In addition, the Parties agree that any
compensation or right which shall have accrued to the Consultant as of the date
of any termination of employment or termination hereof shall survive any such
termination and shall be paid when due to the extent accrued on the date of such
termination.
8.7 Assignability. All of the terms and provisions contained herein
shall inure to the benefit of and shall be binding upon the Parties and their
respective heirs, personal representatives, successors and assigns. However, the
obligations of the Consultant may not be delegated, and the Consultant may not,
without the Company's written consent thereto, assign, transfer, convey, pledge,
encumber, hypothecate or otherwise dispose of this Agreement or any interest
therein. Any such attempted delegation or disposition shall be null and void and
without effect. The Company and the Consultant agree that this Agreement and all
of the Company's rights and obligations hereunder may be assigned or transferred
by the Company to and may be assumed by and become binding upon and may inure to
the benefit of any affiliate of or successor to the Company. The term
"successor" shall mean, with respect to the Company or any of its subsidiaries,
and any other corporation or other business entity which, by merger,
consolidation, purchase of the assets, or otherwise, acquires all or a material
part of the assets of the Company. Any assignment by the Company of its rights
and obligations hereunder to any affiliate of or successor shall not be
considered a termination of employment for purposes of this Agreement.
<PAGE>
8.8 Notices. Any and all notices required or desired to be given
hereunder by either Party shall be in writing and shall be validly given or made
to the other if delivered either personally, by telex, facsimile transmission,
same day delivery Service, overnight expedited delivery service, or if deposited
in the United States Mail, certified or registered, postage prepaid, return
receipt requested. If notice is served personally, notice shall be deemed
effective upon receipt. If notice is served by telex or by facsimile
transmission, notice shall be deemed effective upon transmission, provided that
such notice is confirmed in writing by the sender within one day after
transmission. If notice is served by same day delivery service or overnight
expedited delivery service, notice shall be deemed effective three days after it
is sent. In all instances, notice shall be sent to the Parties at the following
addresses:
If to the Company:
Nexland, Inc.
20801 Biscayne Boulevard Suite 414
Aventura, Florida 33180
Fax: (305) ______________
If to the Consultant:
Nexland, S.A.
--------------------------
--------------------------
Either Party may change its address for the purpose of receiving notices by a
written notice given to the other Party.
8.9 Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless in writing and signed by
each of the Parties.
8.10 Waiver. No reliance upon or waiver of one or more provisions
of this Agreement shall constitute a waiver of any other provisions
hereof.
8.11 Severability. If any provision of this Agreement as applied to
either Party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement. If any court construes any of the provisions to be unreasonable
because of the duration of such provision or the geographic or other scope
thereof, such court may reduce the duration or restrict the geographic or other
scope of such provision and enforce such provision as so reduced or restricted.
<PAGE>
8.12 Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and shall be one
and the same instrument.
8.13 Headings. The captions appearing at the commencement of the
sections hereof are descriptive only and are for convenience of reference.
Should there be any conflict between any such caption and the section at the
head of which it appears, the substantive provisions of such section and not
such caption shall control and govern in the construction of this document.
8.14 Specific Performance. It is agreed that the rights granted to
the Parties hereunder are of a special and unique kind and character and that,
if there is a breach by either Party of any material provision of this document,
the other Party would not have any adequate remedy at law. It is expressly
agreed, therefore, that the rights of the Parties may be enforced by an action
for specific performance and other equitable relief.
8.15 Further Assurances. Each of the Parties shall execute and
deliver any and all additional papers, documents and other assurances, and shall
do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out their intentions as
set forth herein.
8.16 Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the Parties with respect to the subject matter of
this Agreement, and any and all prior agreements, understandings or
representations are hereby terminated and canceled in their entirety.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the date first above written.
NEXLAND, INC., an Arizona corporation
By: /s/ Greg Levine
----------------------------------
Greg Levine, President
NEXLAND, S.A.
By: /s/ Yves Many
-----------------------------------
Yves Many
MUTUAL NON-COMPETITION AGREEMENT
In consideration of the mutual promises contained herein and for such other good
and valuable consideration, the receipt and sufficiency are hereby acknowledged,
NEXLAND, INC., an Arizona corporation (together with its successors, assigns and
other legal representatives, if and where applicable, "Nexland"), and NEXLAND,
S.A., a corporation formed under the laws of France (together with its
successors, assigns and other legal representatives, if and where applicable,
"Nexland France"; together with Nexland, the "Parties," and each a "Party")
covenant and agree as follows:
1. Competition. Each Party acknowledges and agrees that the other would
suffer injury in the event of competition between them. As such, it is
covenanted and agreed as follows:
(a) Effective as of November 17, 2000, and continuing for a period
of five (5) years (the "Restricted Period"), Nexland agrees
that it will not, directly or indirectly, operate, organize,
maintain, establish, manage, own, participate in any business
or venture in any part of Europe (the geographic region of
Europe with respect to Nexland France, and the rest of the
world with respect to Nexland, are referred to herein as each
entity's respective "Restricted Territory") which engages in
the business or other areas of activity of Nexland France or
is otherwise in competition with products or services being
developed, manufactured, marketed, provided or sold by Nexland
France, unless such activity shall have been previously agreed
to in writing by Nexland France;
(b) During the Restricted Period, Nexland France agrees that it
will not, directly or indirectly, operate, organize, maintain,
establish, manage, own, participate in any business or venture
in any part of the Restricted Territory of Nexland, which
engages in the business or other areas of activity of Nexland
or is otherwise in competition with products or services being
developed, manufactured, marketed, provided or sold by
Nexland, unless such activity shall have been previously
agreed to in writing by Nexland;
(c) During the Restricted Period, neither Party shall, directly or
indirectly, divert business from the other.
(d) Notwithstanding anything herein contained to the contrary, a
Party shall not be deemed to be in breach of this Agreement if
it enters into an agreement covering the Restricted Territory
of the other Party. In such instances, that portion of the
agreement concerning the Restricted Territory shall be
assigned to the Party having rights under this Agreement over
such Restricted Territory. The assignee Party shall pay an
amount equal to 20% of such gross sales amount to the assignor
Party.
(e) In the event that either Party receives a commercial inquiry
from a third party located in the Restricted Territory of the
other, such Party shall refer or otherwise direct the inquiry
to the Party holding rights under this Agreement to such
Restricted Territory.
<PAGE>
2. Reasonableness of Restrictions. Each Party has carefully read and
considered the provisions of Section 1 hereof and, having done so,
agrees that the covenants set forth therein are fair and reasonable and
are reasonably required to protect the legitimate business interests of
the other. Each Party agrees that if a court of competent jurisdiction
holds any of the covenants set forth in Section 1 unenforceable, the
court shall substitute an enforceable covenant that preserves, to the
maximum lawful extent, the scope, duration and all other aspects of the
covenants deemed unenforceable, and that any such covenant substituted
by the court shall be immediately enforceable against either Party. The
foregoing shall not be deemed to affect the right of the Parties to
appeal any decision by a court concerning this Agreement.
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida without regard to the
conflict of laws principles thereof.
4. Suits in Florida. The Parties agree that any action or proceeding
relating in any way to this agreement shall be brought exclusively in
the state or federal court of competent subject matter jurisdiction in
Miami-Dade County, Florida. The Parties expressly voluntarily consent
to personal jurisdiction and venue in these courts, and expressly waive
any objection to jurisdiction or venue in these courts.
5. Severability. Each provision hereof shall be deemed a separate
agreement, severally and independently enforceable, regardless of the
invalidity or unenforceability of any other provision. Any invalid or
unenforceable provision shall be deemed, without further action on the
part of the parties, to be modified, amended and limited solely to the
extent necessary to render the same valid and enforceable.
6. Waiver of Jury Trial. The parties hereby knowingly, voluntarily and
intentionally waive the right either may have to a trial by jury in
respect of any litigation based hereon, or arising out of, under or in
connection with this agreement and any document executed in connection
herewith or related hereto, or any course or conduct, or actions or
statements (oral or written) of either party. This provision is a
material inducement for the parties to enter into this transaction.
THE UNDERSIGNED HAVE READ ALL OF THE PROVISIONS OF THIS AGREEMENT AND UNDERSTAND
AND AGREE TO EACH OF THEM.
NEXLAND, INC., an Arizona corporation NEXLAND, S.A., a French corporation
By: /s/ Greg Levine By: /s/ Daniel I. Sultan
------------------------------------ -----------------------------
Name: Greg Levine Name: Daniel I. Sultan
Title: President Title:
Date: Date:
CO-OPERATION AGREEMENT
This Agreement is entered into on this 17th day of November 1999, by and
between:
Nexland Inc., a corporation organized and existing under the laws of
France, having its principal offices at 20801 Biscayne Blvd., Suite
414, Miami, Florida 33180 (hereinafter referred to as "Nexland")
And
Smerwick Ltd. Taiwan Branch, the Taiwan branch office of a corporation
organized and existing under the laws of Hong Kong, having its
principal office at 6Fl., No.236, Tun Hwa North Road, Taipei, Taiwan
R.O.C. (hereinafter referred to as "Smerwick", and together with
Nexland, the Parties.
WHEREAS, Nexland wishes to engage in the design and marketing of networking and
communication equipment and accessories ("the Products").
WHEREAS, Smerwick has sizable experience in the manufacturing follow-up, quality
control, and export of the Products.
WHEREAS, Nexland wishes to co-operate with Smerwick so as benefit from
Smerwick's experience and services in the above fields and Smerwick is willing
to provide such services to Nexland.
NOW, THEREFORE, it is hereby agreed as follows:
ARTICLE 1 Subject Matter of Agreement
Smerwick hereby agrees to render to Nexland, and Nexland agrees to engage
Smerwick to render services under the terms and conditions specified herein.
ARTICLE 2 Scope of Services
2.1 The services to be rendered by Smerwick to Nexland pursuant to
this Agreement shall include the services specified in Article
2.2 herein that shall be performed by Smerwick in Taiwan,
R. O. C.
2.2 Smerwick shall provide the following services to Nexland:
2.2.1 Manufacturing coordination and follow up;
2.2.2 Inspection of products;
<PAGE>
2.2.3 Consolidation and organization of shipments;
2.2.4 Export handling.
ARTICLE 3 No Partnership
Nothing in this Agreement shall constitute or be construed to constitute or tend
to establish a partnership between Smerwick and Nexland. The relationship of the
Parties hereunder shall solely be that of a service provider and service
purchaser.
ARTICLE 4 Exclusivity
During the term of this Agreement and for a period of one year after the
termination of this Agreement, Smerwick shall not render similar services to any
other person or entity that designs, distributes, and or markets products
similar to Nexland's products.
ARTICLE 5 Standard of Services
Smerwick shall exercise all professional and reasonable skill, care and
diligence in rendering the services set out above.
ARTICLE 6 Cofidentiality
Smerwick recognizes and acknowledges that during the course of rendering its
services to Nexland, it will have access to or may become aware of certain
confidential business and technical information of Nexland including without
limitation, certain confidential and proprietary information relating to the
designing, development, construction and marketing of the Products. Smerwick
agrees that it shall at all times maintain the confidentiality of the
information of the Company and that it shall refrain from disclosing any such
information to the disadvantage of Nexland.
ARTICLE 7 Support by Nexland
Nexland shall furnish Smerwick information and data that will allow Smerwick to
timely and properly render its services.
ARTICLE 8 Remuneration
In consideration of the services rendered hereunder by Smerwick, and in order to
cover Smerwick's expenses (customs broker's fees, export costs, consolidation
expenses, administration expenses), Nexland shall pay Smerwick a remuneration
corresponding to three percent (3%) of the amount of the invoices issued against
Nexland for the Products
<PAGE>
ARTICLE 9 Taxes and Dues
Either Party shall bear taxes and dues to accrue in the country where it
conducts its business activities. Either Party hereby undertakes to provide the
other Party relevant assistance in the event that said other Party submits a
request to the tax authorities so as to minimize its tax exposure in accordance
with applicable laws and regulations.
ARTICLE 10 Force Majeure
Neither Party shall be held responsible for any delay or failure in performance
hereunder caused by acts of God or other causes beyond said Party's control and
without said Party's fault or negligence.
ARTICLE 11 Notices
All notices to be given hereunder shall be sent by registered mail or hand
delivered addressed to the Party to whom directed, or hand delivered, at the
addresses indicated below:
if to Nexland: 20801 Biscayne Blvd., Suite 414,
Miami, Florida 33180
Attention: Mr. Greg Levine
if to Smerwick: 6Fl., No.236, Tun Hwa North Road,
Taipei, Taiwan R.O.C.
Attention: Mr. Laurent Solomon.
or at such other address as such Party may from time to time designate in
writing in accordance with the terms of this Article 9.
ARTICLE 12 Entire Agreement
This Agreement incorporates the entire understanding reached between the Parties
with regard to the services to be rendered hereunder. Any amendment, supplement,
alteration or modification to this Agreement must be made in writing in order to
be effective.
ARTICLE 13 Language
Communication between the Parties pursuant to this Agreement shall be in English
ARTICLE 14 Assignment
<PAGE>
No Party shall be entitled to assign this Agreement or any part thereof without
the prior approval of the other Party.
ARTICLE 15 Termination
Either Party may terminate this Agreement upon thirty (30) days written notice
to the other, sent in accordance with Article 9.
ARTICLE 16 Applicable Law / Jurisdiction
All disputes arising out of or in connection with the present contract shall be
finally settled under the Rules of Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with the said Rules,
such arbitration to take place in Paris, France.
IN WITNESS WHEREOF, the parties hereto have caused their respective duly
authorized representatives to execute this Agreement in two original duplicates
on the day and year first above written, with each party retaining a duplicate.
Smerwick Ltd. Taiwan Branch,
a Hong Kong corporation
By: /S/ Laurent Solomon
---------------------------------
Name: Laurent Solomon
Title: Branch Manager
Nexland, Inc.,
a Florida corporation
By: /s/ Greg Levine
-----------------------------------
Name: Greg Levine
Title: President
EXHIBIT 23.1
Williams & Webster, P.S.
Certified Public Accountants
601 West Riverside
Suite 1940
Spokane, Washington 99201-0611
(509) 838-5111
FAX (509) 839-5114
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Nexland, Inc.
Miami Florida
We consent to the use of our audit report dated March 13, 2000 on the
financial statements of Nexland, Inc. as of December 31, 1999, for the filing
with and attachment to the Form S-1.
/s/ Williams & Webster, P.S.
- ----------------------------
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
March 27, 2000
EXECUTIVE COMPENSATION AGREEMENT
--------------------------------
AGREEMENT, dated as of November 17, 1999(the "Agreement"), by and
between Nexland, Inc., an Arizona corporation having its principal place of
business at 20801 Biscayne Boulevard Suite 414, Aventura, Florida 33180 (the
"Company"), and Greg Levine (the "Executive").
WHEREAS, the Company desires to employ and retain the Executive for the
term specified herein in order to advance the business and interests of the
Company on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to provide his services to the Company
in such capacities, on and subject to the terms and conditions hereof;
WHEREAS, the Company desires to provide the Executive with certain
options to acquire stock in the Company in order that the Executive may have the
opportunity to participate in the growth and performance of the Company, as set
forth herein;
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment and Term. Subject to all of the terms and
conditions hereof, the Company does hereby employ and agree to employ the
Executive as its President unless directed by the Board of Directors to serve in
some other executive capacity, for and during the Employment Term, as defined
below, and the Executive does hereby accept such employment. The term of
employment shall commence on November 17, 1999 (the "Effective Date") and shall
continue until December 31, 2005 unless earlier terminated as herein provided
(such term, the "Employment Term"), and thereafter shall be renewed for
additional terms of one (1) year, unless either party provides the other with
notice, as provided for herein, at least ninety (90) days prior to the date the
Employment Term would otherwise renew, of that party's intention not to so renew
such term.
2. Duties of Executive. The Executive shall, during the term
of employment hereunder, perform the executive and administrative duties,
functions and privileges, as the same may be determined by the Board of
Directors of the Company from time to time. The Executive shall report to the
Board of Directors of the Company (or such person designated by the Board of
Directors), and if so elected, the Executive shall serve as a member of the
Board of Directors. The Executive agrees to serve the Company faithfully,
conscientiously and to the best of his ability, and to devote substantially all
of his business time to the business and affairs of the Company (and, if
requested by the Board of Directors, any subsidiary or affiliate of the Company)
so as to promote the profit, benefit and advantage of the Company and, if
applicable, any subsidiaries or affiliates of the Company. The Executive agrees
to accept the payments to be made to him under this Agreement, and the stock
options, if any, to be issued to him under this Agreement, as full and
<PAGE>
complete compensation for the services required to be performed by, and the
covenants of, the Executive under this Agreement.
3. Location and Travel. The Executive shall not be required to
relocate outside the greater Miami-Fort Lauderdale metropolitan area without his
consent. The Executive acknowledges, however, that significant domestic and
international travel may be required as part of his duties hereunder; and the
Executive agrees to undertake such travel as may be reasonably required by the
business of the Company from time to time.
4. Compensation.
-------------
4.1 Base Salary. The Executive shall be paid at an
annual rate of One Hundred Thousand Dollars ($100,000.00) from the Effective
Date until such time as the Company shall have obtained equity investments
and/or debt financing totalling in the aggregate at least one million dollars;
thereafter, at the annual rate of One Hundred Fifty Thousand Dollars
($150,000.00). All compensation shall be made in accordance with the standard
payroll practices of the Company, and whichever compensation rate is applicable
at a particular time is referred to herein as the "Base Salary".
4.2 Performance Bonus. Periodically, but in no event
less than every six (6) months from the Effective Date, the Board of Directors
of the Company (excluding the Executive, if he is a director), shall evaluate
the Executive's performance and determine the amount of any bonus to be paid to
Executive.
4.3 Regular Benefits. The Executive shall be entitled
to participate in any health insurance, accident insurance, hospitalization
insurance, life insurance, pension, or any other similar plan or benefit
afforded by the Company to its employees generally, if and to the extent that
the Executive is eligible to participate in accordance with the provisions of
any such insurance, plan or benefit generally (such benefits, collectively, the
"Regular Benefits").
4.4 Vacation. The Executive shall be entitled to four
(4) weeks paid vacation per year, such vacations to be taken at times mutually
agreeable to the Executive and the Company. The Executive shall further be
entitled to the number of paid holidays, and leaves for illness or temporary
disability in accordance with the policies of the Company for its senior
executives.
4.5 Term Life Insurance. The Company shall have the
right from time to time to purchase, modify or terminate insurance policies on
the life of the Executive for the benefit of the Company in such amount as the
Company shall determine in its sole discretion. In connection therewith the
Executive shall, at such time or times and at such place or places as the
Company may reasonably direct, submit himself to such physical examinations and
execute and deliver such documents as the Company may deem necessary or
desirable; provided, however, that the eligibility
<PAGE>
of the Executive for, or the availability of, such insurance shall not be deemed
to be a condition of continued employment hereunder. The Executive makes no
representation to the Company as to his current or future eligibility for
insurance.
4.6 Expense Reimbursement. The Company shall
reimburse the Executive for all expenses reasonably incurred by him in
connection with the performance of his duties hereunder and the business of the
Company upon the submission to the Company of appropriate receipts therefor, in
accordance with the expense reimbursement policy of the Company which shall be
substantially consistent with the policies applicable to the Executive in
connection with his employment immediately prior to the commencement of the Term
hereof.
5. Termination and Severance Arrangements.
---------------------------------------
5.1 Termination by the Company. The Company may
terminate this Agreement at any time on or after December 31, 2001 by providing
at least 30 days advance written notice to the Executive. In the event that the
Company terminates this Agreement (a) on or after December 31, 2000, (b) other
than in connection with a Change of Control, in which event Section 7 shall
apply, and (c) other than for Cause, in which event Section 6.3 shall apply, the
Company shall, notwithstanding such termination, in consideration for all of the
undertakings and covenants of the Executive contained herein, continue to pay to
the Executive the Base Salary and the Regular Benefits for a period of twelve
(12) months from the date of such termination. In no event however, shall the
continuation of such payments during such post-termination period be deemed to
be employment hereunder for purposes of calculating any bonus due to the
Executive, for purposes of determining the vesting or exercise period of any
stock options granted hereunder, or otherwise.
5.2 Termination by Executive. The Executive may
terminate this Agreement at any time on or after December 31, 2000 by providing
at least 180 days advance written notice to the Company.
5.3 Termination for Cause. Notwithstanding the
Employment Term, the Company may terminate the Executive for Cause, as defined
below, upon a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership (excluding the Executive) of the Board of
Directors at a meeting called and held for such purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board of Directors), finding that in the good
faith opinion of the Board of Directors there shall have been Cause, as defined
below, to terminate the Executive and specifying the particulars thereof in
detail. In the event that the employment of the Executive is terminated by the
Company for Cause, no severance or other post-termination payment shall be due
or payable by the Company to the Executive (except solely such bonus or other
payments as may have been accrued but not yet paid prior to such termination).
For purposes hereof, "Cause" shall mean: (a) the conviction with respect to any
felony or misdemeanor involving theft, fraud, dishonesty or misrepresentation;
(b) any
<PAGE>
material misappropriation, embezzlement or conversion of the Company's or any of
its subsidiary's or affiliate's property by the Executive; (c) willful
misconduct by the Executive in respect of the material duties or obligations of
the Executive under this Agreement; or (d) a material breach by the Executive of
any of his material obligations hereunder, after written notice thereof and a
reasonable opportunity of thirty (30) days to cure the same, provided that the
same is not caused by the physical disability including mental disease or defect
of the Executive, in which event Section 6.4 shall apply.
5.4 Death or Disability. In the event that the
employment of the Executive by the Company is terminated by reason of the death
of the Executive or by reason of the medical or psychiatric disability of the
Executive to perform a material portion of his duties for ninety (90)
consecutive calendar days (a "Disability"), the Company shall, promptly upon
such termination, pay the Executive an amount equal to six (6) months of Base
Salary, in a single lump sum.
6. Parachute Provisions.
---------------------
6.1 Change of Control. For purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred upon the
occurrence of any one or more of the following events.
6. 1.1 Any "person" or "group" (as such terms are
used in connection with Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")) but excluding the Executive or any employee
benefit plan of the Company (a) is or becomes the "beneficial owner" (as defined
in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the combined voting
power of the Company's outstanding securities then entitled to vote for the
election of directors, or (b) acquires by proxy or otherwise fifty percent (50%)
or more of the combined voting securities of the Company having the right to
vote for the election of directors of the Company, for any merger or
consolidation of the Company, or for any other matter; provided, however, that a
Change of Control shall not be deemed to have occurred solely by reason of the
public ownership of fifty percent (50%) or more of the Common Stock of the
Company;
6.1.2 There shall be consummated without the consent
of the Executive (A) any consolidation, merger or recapitalization of the
Company or any similar transaction involving the Company, whether or not the
Company is the continuing or surviving corporation, (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all of the assets of the Company or (C)
the adoption of a plan of complete liquidation of the Company (whether or not in
connection with the sale of all or substantially all of the Company's assets) or
a series of partial liquidations of the Company that is de jure or de facto part
of a plan of complete liquidation of the Company; provided that the divestiture
of less than substantially all of the assets of the Company in one transaction
or a series of related transactions, whether effected by sale, lease, exchange,
spin-off, sale of the stock or
<PAGE>
merger of a Subsidiary or otherwise, or a transaction solely for the purpose of
reincorporating the Company in another jurisdiction, shall not constitute a
"Change in Control."
6.2 Rights on Change in Control. If within one year
after, or 90 days prior to, a Change in Control of the Company, the Company
shall terminate the Executive's employment other than by reason of the
Executive's death or Disability or for Cause, the Company shall pay to the
Executive as compensation for services rendered, not later than the fifth
business day after the date of termination:
6.2.1 the Executive's Base Salary through the date of
termination, any Regular Benefits and incentive compensation for the fiscal year
in which the termination occurs in accordance with any arrangements then
existing with the Executive and proportionate to the period of the fiscal year
which has expired prior to the termination; and
6.2.2 a lump sum severance payment equal to two (2)
times the Executive's average annual compensation during the Base Period, as
defined in the Internal Revenue Code (the "Code") provided that in no event
shall Total Payments, as defined in the Code, exceed two (2) times the
Executive's Base Amount as such term is defined in Section 28OG of the Code. The
Executive's Base Amount shall be determined in accordance with temporary or
final regulations promulgated under Section 28OG of the Code then in effect, if
any.
7. Proprietary Rights.
-------------------
7.1 Non Competition. The Executive covenants and
agrees that for so long as he shall be employed by the Company and for a period
of one year from the later of the termination of such employment (such period of
time the "Restricted Period") the Executive shall not directly or indirectly,
own, manage, control, operate invest in or become principal of employee of,
director of, or consultant to, any business, entity or venture which is
competitive with the business of the Company as conducted at such time;
provided, however, that it shall not be a violation of this Agreement for the
Executive to have beneficial ownership of less than 5% of the outstanding amount
of any class of securities of any enterprise (but without otherwise
participating in the activities of such enterprise) if such securities are
listed on a national securities exchange or quoted on an inter-dealer quotation
system.
7.2 Confidentiality. The Executive recognizes and
acknowledges that certain confidential business and technical information used
by the Employee in connection with his duties hereunder that includes, without
limitation, certain confidential and proprietary information relating to the
designing, development, construction and marketing of computer hardware, is a
valuable and unique asset of the Company. Executive agrees that he shall at all
times maintain the confidentiality of the proprietary information and trade
secrets of the Company, and that he shall during the Restricted Period refrain
from disclosing any such information to the disadvantage of the Company.
<PAGE>
7.2.1 During the Restricted Period the
Executive shall not, directly or indirectly (A) solicit, in competition with the
Company, any person who is a customer of any business conducted by the Company,
or (B) in any manner whatsoever induce, or assist others to induce, any supplier
of the Company to terminate its association with such entity or do anything,
directly or indirectly, to interfere with the business relationship between the
Company, and any of their respective current or prospective suppliers.
7.2.2 During the Restricted Period the
Executive shall not, directly or indirectly, solicit or induce any employee of
the Company to terminate his or her employment for any purpose, including
without limitation, in order to enter into employment with any entity which
competes with any business conducted by the Company
7.3 Ownership by Company. The Executive acknowledges
and agrees that all of his work product created, produced or conceived in
connection with his association with the Company shall be deemed work for hire
and shall be deemed owned exclusively by the Company. The Executive agrees to
execute and deliver all documents required by the Company to document or perfect
the Company's proprietary rights in and to the Executive's work product.
7.4 Remedies. It is expressly understood and agreed
that the services to be rendered hereunder by the Executive are special, unique,
and of extraordinary character, and in the event of the breach by the Executive
of any of the terms and conditions of this Agreement on his part to be performed
hereunder, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of this Section 8 of this Agreement, then the
Company shall be entitled, if it so elects, to institute and prosecute any
proceedings in any court of competent jurisdiction, either in law or equity, for
such relief as it deems appropriate, including without limiting the generality
of the foregoing, any proceedings, to obtain damages for any breach of this
Agreement, or to enforce the specific performance thereof by the Executive.
8. Market Standoff Agreement. The Executive hereby agrees that
if so requested by the Company or by any representative of any underwriters in
connection with any registration of the offering of any securities of the
Company under the Securities Act, the Executive shall not sell or otherwise
transfer any securities of the Company during the ninety-day period following
the effective date of a registration statement of the Company filed under the
Securities Act.
9. Independent Representation. The Executive acknowledges that
he has had the opportunity to seek independent counsel and tax advice in
connection with the execution of this Agreement, and the Executive represents
and warrants to the Company (a) that he has sought such independent counsel and
advice as he has deemed appropriate in connection with the execution hereof and
the transactions contemplated hereby; and (b) that he has not relied on any
representation of the Company as to tax matters, or as to the consequences of
the execution hereof. The Company hereby agrees to reimburse the Executive for
the reasonable costs of legal counsel and tax advice
<PAGE>
incurred by the Executive in connection with the negotiation of this Agreement
and the relationship and transactions contemplated hereby, up to a maximum of
Five Thousand Dollars ($5,000).
9.1 Neutral Construction. No party may rely on any
drafts of this Agreement in any interpretation of the Agreement. Each party to
this Agreement has reviewed this Agreement and has participated in its drafting
and, accordingly, no party shall attempt to invoke the normal rule of
construction to the effect that ambiguities are to be resolved against the
drafting party in any interpretation of this Agreement.
9.2 Attorney's Fees. In the event that either party
hereto commences litigation against the other to enforce such party's rights
hereunder, the prevailing party shall be entitled to recover all costs, expenses
and fees, including reasonable attorneys' fees (including in-house counsel),
paralegals, fees, and legal assistants' fees through all appeals.
10. General.
--------
10.1 No Brokers. Each of the parties to this
Agreement represents and warrants to the other that it has not utilized the
services of any finder, broker or agent. Each of the parties agrees to indemnify
the other party against any and all liabilities to any person, firm or
corporation claiming any fee or commission of any kind on account of services
rendered on behalf of such party in connection with the transactions
contemplated by this Agreement.
10.2 Applicable Law. This document shall in all
respects be governed by the laws of the State of Florida. The parties
acknowledge that substantially all of the negotiations relating to this
Agreement were conducted in Florida, and that this Agreement has been executed
by both parties in Florida. Any legal suit, action or proceeding against any
party hereto arising out of or relating to this Agreement shall be instituted in
a federal or state court in Dade County, Florida, and each party hereto waives
any objection which it may now or hereafter have to the laying of venue of any
such suit, action or proceeding and each party hereto irrevocably submits to the
jurisdiction of any such court in any suit, action or proceeding
10.3 Rights Absolute. The Company's obligation to pay
the Executive the compensation specified herein shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, any setoff, counterclaim, defense or other right which the Company
may have against the Executive or anyone else. All amounts payable by the
Company hereunder shall be paid without notice or demand.
10.4 No Offset. Except as expressly provided herein,
the Company waives all rights it my now have or may hereafter have conferred
upon it, by statute or otherwise, to terminate, cancel or rescind this Agreement
in whole or in part. The Executive shall not be required to mitigate the amount
of any payment provided for in this Agreement by seeking other employment,
<PAGE>
and if Executive obtains such other employment, any compensation earned by
Executive pursuant thereto shall not be applied to mitigate any payment made to
Executive pursuant to this Agreement.
10.5 Successor Obligations. The Company shall require
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume by written agreement and to agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
10.6 Survival. The parties hereto agree that the
covenants contained in Section 8 hereof shall survive any termination of
employment by the Executive and any termination of this Agreement. In addition,
the parties hereto agree that any compensation or right which shall have accrued
to the Executive as of the date of any termination of employment or termination
hereof shall survive any such termination and shall be paid when due to the
extent accrued on the date of such termination.
10.7 Assignability. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns. The obligations of the Executive however, may not be assigned, and
the Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest therein. Any such attempted assignment or disposition
shall be null and void and without effect. The Company and the Executive agree
that this Agreement and all of the Company's rights and obligations hereunder
may be assigned or transferred by the Company to and may be assumed by and
become binding upon and may inure to the benefit of any affiliate of or
successor to the Company. The term "successor" shall mean, with respect to the
Company or any of its subsidiaries, and any other corporation or other business
entity which, by merger, consolidation, purchase of the assets, or otherwise,
acquires all or a material part of the assets of the Company. Any assignment by
the Company of its rights and obligations hereunder to any affiliate of or
successor shall not be considered a termination of employment for purposes of
this Agreement.
10.8 Notices. Any and all notices required or desired
to be given hereunder by any party shall be in writing and shall be validly
given or made to another party if delivered either personally, by telex,
facsimile transmission, same day delivery Service, overnight expedited delivery
service, or if deposited in the United States Mail, certified or registered,
postage prepaid, return receipt requested. If notice is served personally,
notice shall be deemed effective upon receipt. If notice is served by telex or
by facsimile transmission, notice shall be deemed effective upon transmission,
provided that such notice is confirmed in writing by the sender within one day
after transmission. If notice is served by same day delivery service or
overnight expedited delivery service, notice shall be deemed effective the day
after it is sent, and if notice is given by United
<PAGE>
States mail, notice shall be deemed effective five days after it is sent. In all
instances, notice shall be sent to the parties at the following addresses:
If to the Company: Nexland, Inc.
20801 Biscayne Boulevard Suite 414
Aventura, Florida 33180
Fax: (305) 937-3877
If to the Executive: Greg Levine
Nexland, Inc.
20801 Biscayne Boulevard
Suite 414
Miami, Florida 33180
Any party may change its address for the purpose of receiving notices by a
written notice given to the other party.
10.9 Modifications or Amendments. No amendment,
change or modification of this document shall be valid unless in writing and
signed by all of the parties hereto.
10.10 Waiver. No reliance upon or waiver of one or
more provisions of this Agreement shall constitute a waiver of any other
provisions hereof.
10.11 Severability. If any provision of this
Agreement as applied to either party or to any circumstances shall be adjudged
by a court of competent jurisdiction to be void or unenforceable, the same shall
in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement. If any court construes any of the provisions
to be unreasonable because of the duration of such provision or the geographic
or other scope thereof, such court may reduce the duration or restrict the
geographic or other scope of such provision and enforce such provision as so
reduced or restricted.
10.12 Separate Counterparts. This document may be
executed in one or more separate counterparts, each of which, when so executed,
shall be deemed to be an original. Such counterparts shall, together, constitute
and shall be one and the same instrument.
10.13 Headings. The captions appearing at the
commencement of the sections hereof are descriptive only and are for convenience
of reference. Should there be any conflict between any such caption and the
section at the head of which it appears, the substantive provisions of such
section and not such caption shall control and govern in the construction of
this document.
<PAGE>
10.14 Specific Performance. It is agreed that the
rights granted to the parties hereunder are of a special and unique kind and
character and that, if there is a breach by any party of any material provision
of this document, the other party would not have any adequate remedy at law. It
is expressly agreed, therefore, that the rights of the parties hereunder may be
enforced by an action for specific performance and other equitable relief.
10.15 Further Assurances. Each of the parties hereto
shall execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and things reasonably necessary in
connection with the performance of their obligations hereunder and to carry out
the intent of the parties hereto.
10.16 Entire Agreement. This Agreement constitutes
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement, and any and all prior agreements,
understandings or representations are hereby terminated and canceled in their
entirety.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
NEXLAND, INC., an Arizona corporation
By: /s/ Gregory S. Levine
---------------------------------
Name: Gregory S. Levine
Title: President
By: /s/ Greg Levine
-----------------------------------
Greg Levine
