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. 4 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
1101 Brickell Avenue
Suite 702, North Tower
Miami, Florida 33131
(305) 358-7771
-------------------------------------------------------------------------
(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.)
<PAGE>
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.
This Post Effective Amendment No. 4 brings current the Registration
Statement filed with the Securities and Exchange Commission on June 17, 1998.
This Registration Statement covers the issuance of our common stock which is
subject to the exercise of the Class A and Class B Warrants. In addition to
updating investors about our new business, this Post-Effective Amendment
contains current financial information about the Company. The method of
accounting for certain business combinations employed in connection with the
Post Effective Amendment #3 dated, May 4, 2000, has been determined to be
inappropriate. The Company has corrected these financial statements for the
effects of these combinations. Accordingly, 1999, 1998 and 1997 financial
statements have been restated.
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_______.
<PAGE>
<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>
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
--------------------------------------------------------------------------------------------------------------
TOTAL REGISTRATION FEE $ 9,541,558 $4,155.42[7]
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</TABLE>
[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.
[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.
<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 REFERENCE
Front Cover Page of Prospectus SHEET; OUTSIDE FRONT COVER PAGE
2. Inside Front and Outside INSIDE FRONT COVER PAGE; OUTSIDE
Back Cover Pages of Prospectus 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 PAGE;
to be Registered 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
11b. Description of Property NOT APPLICABLE
11c. Legal Proceedings PROPOSED BUSINESS
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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
and Analysis of Financial ANALYSIS OF FINANCIAL CONDITION
Condition and Results AND RESULTS OF OPERATIONS
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>
<PAGE>
PROSPECTUS
NEXLAND, INC. (Formerly, WindStar Resources, Inc.)
for the public offering for sale of 3,141,558 Shares of Common Stock.
We sell, design, develop, distribute and out source 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.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. WE URGE YOU TO
READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE ________,
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.
Price to Underwriting Proceeds to
Public[1] Commission Company
--------- ---------- -------
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]
[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.
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.
<PAGE>
TABLE OF CONTENTS
1. SUMMARY OF OUR OFFERING.................................................. 1
1.1 OUR BUSINESS........................................... 1
1.2 THE OFFERING........................................... 2
1.3 USE OF PROCEEDS........................................ 3
1.4 RISK FACTORS........................................... 3
1.5 SELECTED FINANCIAL INFORMATION......................... 3
2. RISK FACTORS............................................................. 4
2.1. OUR LIMITED OPERATING HISTORY MAKES IT
DIFFICULT FOR AN INVESTOR TO EVALUATE OUR
BUSINESS AND PROSPECTS..................................... 4
2.2 WE HAVE HAD HISTORY OF LIMITED
REVENUES THIS MAY CONTINUE TO BE THE CASE.................. 5
2.3 WE HAVE HAD HISTORY OF A LIMITED CUSTOMER
BASE AND THIS MAY CONTINUE TO BE THE CASE.................. 5
2.4 WE ARE SUBJECT TO ALL OF THE SUBSTANTIAL
RISKS INHERENT IN AN INTERNET BUSINESS, WHICH
MAY HARM OUR ABILITY TO OPERATE SUCCESSFULLY .............. 6
2.5 IF WE CANNOT MANAGE OUR GROWTH
EFFECTIVELY, OUR BUSINESS COULD BE HARMED.................. 6
2.6 IF WE CANNOT INTEGRATE NEW BUSINESSES,
OPERATIONS, TECHNOLOGY, AND PERSONNEL OUR
GROWTH AND OUR BUSINESS COULD BE HARMED.................... 6
2.7 IF WE RAISE ADDITIONAL CAPITAL THROUGH
THE ISSUANCE OF EQUITY OR CONVERTIBLE
DEBT, YOUR PROPORTIONATE INTEREST WILL BE DILUTED.......... 7
2.8 WE MAY NOT BE ABLE TO RAISE ADDITIONAL
CAPITAL ON THE MOST FAVORABLE TERMS........................ 7
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................................ 7
2.10 YOU MAY NOT BE ABLE TO RESELL SHARES OF
OUR STOCK AT OR FOR MORE THAN THE PRICE YOU PAID........... 8
2.11 THERE IS A POTENTIAL LACK OF LIQUIDITY
FOR COMMON STOCK........................................... 8
2.12 IF WE TRADE BELOW $5.00 PER SHARE
WE WILL BE SUBJECT TO PENNY STOCK REGULATIONS
AND RESTRICTIONS........................................... 8
i
<PAGE>
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........................................... 9
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............................................. 9
2.15 OUR BUSINESS PLAN CONTEMPLATES
FUTURE INTERNATIONAL OPERATIONS BUT
THERE ARE NUMEROUS RISKS AND UNCERTAINTIES
IN OFFERING SERVICES OUTSIDE OF THE UNITED STATES.......... 9
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.................. 10
2.17 BECAUSE OF THE UNCERTAINTY ASSOCIATED
WITH UNPROVEN BUSINESS MODELS, WE MAY BE
UNABLE TO ACHIEVE WIDESPREAD MARKET
ACCEPTANCE................................................. 11
2.18 WE CANNOT BE CERTAIN THAT WE WILL BE
ABLE TO COMPETE WITH SIGNIFICANT PRICING PRESSURE
BY OUR COMPETITORS......................................... 11
2.19 OUR BUSINESS WILL BE ADVERSELY AFFECTED
IF WE LOSE MARKET SHARE.................................... 11
2.20 WE HAVE LIMITED MARKETING AND SALES CAPABILITY........ 13
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............................................... 14
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....................................... 14
2.23 WE HAVE NOT PAID NOR DO WE EXPECT TO
PAY DIVIDENDS IN THE NEAR FUTURE........................... 15
ii
<PAGE>
2.24 THE INSIDE SHAREHOLDERS RECEIVED
SHARES FOR LESS CONSIDERATION THAN YOU
ARE ASKED TO PAY........................................... 15
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 .................................... 15
2.26 WE HAVE EXPERIENCED NEGATIVE CASH
FLOW WHICH COULD RESULT IN OUR INABILITY
TO FUND PROGRAMS AND CREATE A NEED FOR
ADDITIONAL FINANCING....................................... 15
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................. 16
2.28 IF WE FAIL TO DEVELOP AND EXPAND OUR
DISTRIBUTION CHANNELS OUR BUSINESS WILL SUFFER............. 17
2.29 OUR FINANCIAL RESULTS MAY PERIODICALLY
VARY DUE TO FACTORS WHICH MAY AFFECT OUR STOCK............. 17
2.30 WE WILL HAVE BROAD DISCRETION TO USE THE
PROCEEDS FROM THIS OFFERING IN A WAY YOU
MAY DISAGREE............................................... 18
3. FORWARD LOOKING STATEMENTS............................................... 18
4. USE OF PROCEEDS.......................................................... 19
5. DILUTION................................................................. 20
6. CAPITALIZATION........................................................... 22
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.................................................... 23
7.1. OVERVIEW............................................. 23
7.2. REVERSE SPLIT........................................ 24
iii
<PAGE>
7.3. RESULTS OF OPERATIONS................................ 25
GOING CONCERN.............................................. 26
7.4. LIQUIDITY AND CAPITAL RESOURCES...................... 27
8. OUR BUSINESS.............................................................. 28
8.1. GENERAL.............................................. 28
8.2. EXPLANATION AND BACKGROUND OF THE INTERNET........... 28
8.3. THE BENEFITS OUR PRODUCTS ARE DESIGNED TO PROVIDE.... 33
8.4. A DESCRIPTION OF OUR PRODUCTS........................ 34
8.5. BACKGROUND OF THE COMPANY............................ 35
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............................................ 45
8.12. PROPERTY LOCATION, DESCRIPTION AND ACCESS............ 46
8.13. RESEARCH AND DEVELOPMENT............................. 46
8.14. MANUFACTURING........................................ 46
8.15. LEGAL MATTERS........................................ 47
8.16. DIVIDEND POLICY...................................... 47
8.17. AVAILABILITY OF INFORMATION.......................... 47
9. OUR MANAGEMENT........................................................... 47
9.1. OUR DIRECTORS AND EXECUTIVE OFFICERS................. 47
9.2. INDEMNIFICATION...................................... 49
9.3. EXECUTIVE COMPENSATION............................... 50
SUMMARY COMPENSATION TABLE........................... 50
9.4 STOCK OPTION PLAN.................................... 51
10. CERTAIN TRANSACTIONS................................................... 52
11. SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT............. 54
12. MARKET PRICE OF SECURITIES.............................................. 56
12.1 VOLATILITY AND FLUCTUATION OF OUR COMMON STOCK................ 57
13. DESCRIPTION OF THE SECURITIES........................................... 58
13.1 IN GENERAL.................................................... 58
13.2 COMMON STOCK.................................................. 58
13.3 PREFERRED STOCK............................................... 58
13.4 DESCRIPTION OF REDEEMABLE WARRANTS............................ 59
13.5 ANTI-TAKEOVER PROVISIONS OF ARIZONA LAW....................... 60
iv
<PAGE>
14. SHARES ELIGIBLE FOR FUTURE SALE......................................... 61
14.1 IN GENERAL.................................................... 61
14.2 RESTRICTED SECURITIES......................................... 61
14.3 TRANSFER AGENT AND WARRANT AGENT.............................. 61
15. SELLING SECURITY HOLDERS................................................ 62
16. PLAN OF DISTRIBUTION.................................................... 62
17. LITIGATION.............................................................. 63
18. LEGAL MATTERS........................................................... 63
19. EXPERTS................................................................. 63
20. ADDITIONAL INFORMATION.................................................. 64
PART II...................................................................... 65
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION......................... 65
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS........................... 65
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES............................. 66
ITEM 16. EXHIBITS............................................................ 67
ITEM 17. UNDERTAKINGS........................................................ 69
SIGNATURES................................................................... 72
v
<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 design
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
1
<PAGE>
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 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 ......................... 35,678,916
Securities offered upon
exercise of A Warrants ..................................... 1,541,558
Securities offered upon
exercise of B Warrants ..................................... 1,600,000
Equity Securities to be outstanding after offering (assuming complete exercise
of A and B Warrants):
o common...................................................... 38,820,474
o preferred................................................... -0-
o options..................................................... 160,000
o warrants.................................................... -0-
2
<PAGE>
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.
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.
Balance Sheet Data
<TABLE>
<CAPTION>
March 31, 2000
1997[1] 1998[1] 1999[1] (Unaudited)
----------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Current Assets ......................... $ 9,540 $ 7,666 $ 139,295 $ 470,233
Total Assets ........................... 14,776 11,906 147,250 485,728
Current Liabilities .................... 200 97,232 269,553 539,233
Long-term debt ......................... -0- -0- 201,917 201,917
Stockholders' Equity (deficit) [2] ..... 14,576 (85,326) (324,220) (255,422)
Total Liabilities &
Stockholders' Equity ................ 14,776 11,906 147,250
Net Tangible Book Value Per Share [3] .. Nil Nil Nil Nil
</TABLE>
3
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
March 31, 2000
1997 1998 1999 Unaudited
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Revenues .......................... $ -0- $ -0- $ 263,338 $ 208,607
Cost of Revenues .................. -0- -0- 129,311 85,732
Operating Expenses ................ 53,324 99,902 265,370 546,132
Net Income (Loss) ................. (53,324) (99,902) (131,343) (423,257)
Net Income (Loss) per share[3]..... Nil Nil Nil (.01)
Balance Sheet Data:
Working Capital (deficit) ....... $ 9,340 $ (89,566) $(130,258) (69,000)
Total Assets .................... 14,776 11,906 147,250 (485,728)
Long-term Debt .................. -0- -0- 201,917 201,917
Stockholders' equity (deficit) .. 14,576 (85,326) (324,220) (485,728)
</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.
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
4
<PAGE>
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, ,
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 A 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 $327,630 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 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
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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.
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:
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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 issue, based on the
results
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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 May 26, 2000, the bid and ask price of our
common stock has ranged from a high of $8.00 to a low of $2.50. 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 May 26, 2000,
the closing trade price of our common stock was $3.00 per share, and therefore
is 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 35,678,916 shares
of common stock of which 35,006,950 shares are "restricted securities" as that
term is defined under Rule 144 promulgated under the Securities Act. Future
sales of the 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:
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o Unexpected changes in regulatory requirements.
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
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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
land 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
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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 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;
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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.
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.
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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 and our consultant 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.
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 82% 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
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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 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
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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 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.
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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
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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.
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.
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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:
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.
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:
Purpose A warrants A & B Warrants
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
19
<PAGE>
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 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 May 26, 2000, the Company had 35,678,916 shares of Common Stock
outstanding with no net tangible book value per share. We had a net deficit of
20
<PAGE>
$327,630 as of our most recent audited financial statements dated December 31,
1999. 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. The net loss for the Quarter
ended March 31, 2000, was $423,257 and a total stockholder's deficit of
$255,422.
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 $1,286,166 or approximately
$0.03 per share. This represents an immediate dilution of $0.97 per share to new
investors and an immediate increase in the net tangible book value of shares
held by present shareholders of $0.03 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 $7,744,578 or approximately
$0.21 per share. This represents an immediate dilution of $ $4.79 per share to
new investors and an immediate increase in the net tangible book value of shares
held by present shareholders of $0.21 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
<TABLE>
<CAPTION>
Assuming Exercise Assuming Exercise Assuming 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 0.03 0.21 0.24
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
Net tangible book
value per share
after offering 0.03 0.21 0.24
Dilution of net
tangible book
value per share to
new investors $0.97 $4.79 $2.80
</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 May 25, 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."
<TABLE>
<CAPTION>
As Adjusted for As Adjusted for As Adjusted for
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;
35,678,916 shares outstanding $ 3,567.89 -- -- --
at, May 25, 2000;
37,220,504 shares outstanding
(A Warrants); $ -- 3722.05 -- --
37,278,916 Shares Outstanding
(B Warrants) -- -- 3727.89 --
38,820,474 shares outstanding
(A & B Warrants); 3882.05
Preferred Stock $0.0001 par value, $ -- -- -- --
authorized 10,000,000 shares;
-0- issued and outstanding
at May 25, 2000
Additional Paid-In Capital[1] $ 4,940,647.11 6,482,080.95 12,940,487.11 14,481,920.95
Accumulated Deficits[2]) (5,199,637.00) (5,199,637.00) (5,199,637.00) (5,199,637.00)
TOTAL STOCKHOLDERS'
EQUITY $ (255,422.00) 1,286,166.00 7,744,578.00 9,286,166.00
</TABLE>
22
<PAGE>
[1] Additional paid-in capital includes $159,984 from exercise of options in
March 2000, and $4,780,663.11 from stock issued for services and financing
purposes in March, April, and May 2000.
[2] Accumulated deficit was $327,630, at December 31, 1999. This has been
increased by the net loss for the first quarter of 2000 of $423,257, and by the
issuance of common stock for services during the months of April and May 2000,
valued at $4,448,750.
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 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.
23
<PAGE>
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 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 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.
24
<PAGE>
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 $100.294.00 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, insurance
and professional fees, such as legal, accounting and
consulting. These expenses increased to $143,669 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.
25
<PAGE>
Depreciation for the year ended December 31, 1999 increased to
$1,716 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.
(3) Interest expense. For the months ended December 31, 1999,
Interest expense 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 $25,108 for
Nexland, Inc. and $106,235 for the predecessor Nexland LP. The
total net loss for the year ended December 31, 1999 of the
combined entities is $131,343.
For the Quarter Ending March 31, 2000:
(1) Revenues: For the quarter ended March 31, 2000, we had
$208,607 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 quarter ended March 31, 2000 was $85,732. Actual
product sales did not begin until January 1999, so there are
no comparable costs of product for 1998.
General and administrative expenses consist primarily of
office and equipment rent, costs associated with operating our
offices, such as telephones, utilities and supplies, insurance
and professional fees, such as legal, accounting and
consulting. These expenses amounted to $539,755 for the
quarter ended March 31, 2000.
Depreciation for the quarter ended March 31, 2000 was $840.00.
Interest expense. For the months ended March 31, 2000,
Interest expense increased to $5,536.00
(4) Income From Operations. These activities resulted in a net
loss for the quarter ended March 31, 2000, $423,256 for
Nexland, Inc.
GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of operation. The Company's ultimate ability to attain
profitable operations is dependent upon obtaining additional financing adequate
to complete its marketing and promotional activities, and to achieve a level of
sales adequate to support its cost structure. Through March 31, 2000, the
Company has incurred losses totaling $750,886 and is developing a customer base
for its product, all of which raise substantial doubt about the Company's
ability to continue as a going concern.
As previously reported in its Form 10-KA for the year ended December
31, 1999, the Company needed to increase the sales of the Company's product and
raise additional capital to continue its operations. Management believes that
significant resources will be available from private and public sources in 2000
to continue the marketing of its internet sharing devices. 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. The Company has no commitment for any additional
capital and no assurances can be given that the Company will be successful in
raising any new capital. The Company's inability to increase its sales and/or to
raise new capital will have a material adverse effect on the Company's ability
to continue its operations and financial condition and on its ability to
continue as a going concern. See "Management's Plan of Operations and Discussion
and Analysis - Liquidity and Capital Resources."
26
<PAGE>
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 $3000,000 on new
product, increasing the Company's sales force and additional research and
development. In addition, our present operating costs are approximately $70,000
per month and we expect to have operating costs of approximately $250,000 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 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.
27
<PAGE>
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 $ 300,000
in developing new products, purchasing computers and other systems. 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
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.
28
<PAGE>
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.
(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
29
<PAGE>
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
30
<PAGE>
higher cost of xDSL and cable modem access technologies relative to analog
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
31
<PAGE>
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.
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
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<PAGE>
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 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.
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.
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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 and
ISB2LAN-H4 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
personal computers 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 personal computers to the office
with up to 250 personal computers. 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.
o ISB2LAN-H4-Same product as the ISB2LAN except with an integrated 4
port hub
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.
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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 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 35,978,916
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.
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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 Miami, 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 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
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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.
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.
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(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
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:
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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 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
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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
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We believe that we have several advantages over these competitors,
including:
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.
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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.
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
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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 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.
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8.11. EMPLOYEES
As of May 26, 2000, we employed nine persons, including four in
operations, two in sales and marketing, and three 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, Chief Executive Officer and Chief
Financial Officers, are subject to employment agreements. Gregory S. Levine, our
President 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.
Enrique Dillon, our Chief Executive Officer is subject to an April 25, 2000
employment agreement with us which provides for:
o a two year term
o a base salary of $150,000 upon the earlier of the Company
obtaining financing of at least $1,000,000 dollars or 60 days from the
date of the Contract
o the issuance of 1,170,000 shares of common stock subject to
forfeiture in the event of resignation or termination for cause prior
to the expiration of the Contract i.e. April 25, 2002.
Martin Dell'Oca, our Chief Financial Officer, is also subject to a
May 1, 2000 employment contract with the Company which provides for:
o a two year term
o a base salary of $100,000 until we obtain debt or equity
financing of at least $1,000,000 at which time, base salary increases
to $120,000
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o the issuance of 200,000 shares of common stock subject to
forfeiture in the event of resignation or termination for cause prior
to the expiration of the Contract, i.e. May 1, 2002.
8.12. PROPERTY LOCATION, DESCRIPTION AND ACCESS
We currently lease our offices located at 1101 Brickell Avenue, Suite
702, North Tower, Miami, Florida 33131, consisting of 1,035 square feet of
corporate office space for $1,900 per month, plus tax on a month to month basis.
Our inventory is located in a warehouse in Miami, Florida, near the Miami
International Airport. Although a lease exists only on the office 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) 358-7771.
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
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o consolidate and organize our shipments
o and handle our exports.
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:
Name Age Position Term
---- --- -------- ----
Gregory S. Levine 33 President/Chairman of 2000-2001
the Board of Directors
Richard G. Steeves 60 Secretary and Director 2000-2001
Enrique Dillon 38 Chief Executive Officer 2000-2001
Martin Dell'Oca 38 Chief Financial Officer 2000-2001
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(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.
(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.
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Enrique Dillon, 38, is Chief Executive Officer. Prior to joining
Nexland, Inc., from 1998 to April 2000, Mr. Dillon was engaged as President of
Big Blue, Inc., a consultant in the management and technology field for Latin
America. Mr, Dillon served as President and Chief Executive Officer of Dinexim
Corp. from 1995 to 1997.
Martin E. Dell'Oca, 38, is Chief Financial Officer of Nexland, Inc.
From May 1997 to December 1999, Mr. Dell'Oca served as Chief Financial Officer
of CHS Dinexim after Dinexim was sold to CHS. From 1995 to May 1997, Martin
Dell'Oca was the Chief Financial Officer of Dinexim.
(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 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
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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
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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 2000-2001 $100,000[1] -0- -0- -0- -0- -0- -0-
President
Richard G. Steeves 2000-2001 $ [5] -0- -0- -0- -0- -0- -0-
Secretary
Fred Schmid 1999-2000 7,500[3] 226,885[2] 320,000[4] -0- -0-
Former Chief Executive
Officer and President
Enrique Dillon 2000-2001 $0[6] 1,170,000[6]
Chief Executive Officer
Martin Dell'Oca 2000-2001 $100,000[7] 200,000[7]
Chief Financial Officer
</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
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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 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
[6] On April 25, 2000 the Company executed an employment contract ("Contract")
with Mr. Dillon. Mr. Dillon receives no base salary until the earlier of the
Company obtaining financing of at least $1,000,000 dollars or 60 days from the
date of the Contract. In addition, Mr. Dillon received 1,170,000 shares of
common stock subject to forfeiture in the event of resignation or termination
for cause prior to the expiration of the Contract i.e., April 25, 2002.
[7] On May 1, 2000, the Company executed an employment contract ("Contract")
with Mr. Dell'Oca. Mr. Dell'Oca's base compensation of $100,000 increases to
$120,000, upon the Company raising at least $1,000,000 in debt or equity
financing. In addition, Mr. Dell'Oca received 200,000 shares of common stock
subject to forfeiture in the event of resignation or termination for cause prior
to the expiration of the Contract, i.e. May 1, 2002.
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
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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
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:
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(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
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.
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(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 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 35,678,916 shares
of common stock outstanding as of May 2000.
Name and Address
of Beneficial Owner [6] Number of Shares Percent of Class [7]
----------------------- ---------------- --------------------
BH Investor Group, LLC[1] 12,611,250 35.4
P.O. Box 3783,
Hallandale, Fla 33008
Andre Chouraqui 5,044,500 14
Barker Road #2, House #9
The Peak, Hong Kong
Fast-Access Group, LLC[2] 5,044,500 14
P.O. Box 9096
Daytona Beach, Fla. 32120
Broadband Investor Group, LLC[3] 2,602,500 7.3
P.O. Box. 693267
Miami, Fla. 33169
High-Speed Venture, LLC[4] 2,522,250 7.1
P.O. Box 693267
Miami, Fla. 33169
Richard G. Steeves[5] 10,466 0.3
1911 E. Meadowlake Drive
Mahomet, Ill. 61586
Enrique Dillon[6] 1,170,000 3.3
c/o Nexland Inc.
1101 Brickell Avenue
Suite 702, North Tower
Miami, Florida 33131
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Martin Dell'Oca[6] 200,000 .06
385 Hampton Lane
Key Biscayne, FL 33149
All directors and executive 3,982,966 11
officers as a group
-------------------------------
[1] this entity is controlled by Israel Daniel Sultan
[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
[6] These shares were issued pursuant to the officer's respective employment
agreements, but are subject to forfeiture under certain conditions. The shares
are held in escrow during the forfeiture period.
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 May 26, 2000, the closing trade price of the common stock as
reported on the OTC Bulletin Board was $ $3.00. As of such date, there were
approximately 398 holders of record of our common stock.
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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 May
26, 2000, the bid and ask price of our common stock has ranged from a high of
$8.00 to a low of $ $2.50. 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.
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.
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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 35,678,916 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 37,220,474 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 38,820,474 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 May 31, 2000, we had approximately
389 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.
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
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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 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.
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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" 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.
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14. SHARES ELIGIBLE FOR FUTURE SALE.
14.1 IN GENERAL
In the event that no Warrants are exercised the Company will have
outstanding 35,678,916 shares of Common Stock. If all Class A and Class B
Warrants are exercised, there will 38,820,474 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
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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;
Warrants not exercised prior to the termination of the exercise period
will expire. See, "Description of Securities - Warrants."
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
Williams & Webster 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.
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<PAGE>
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 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.
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.
1101 Brickell Avenue
Suite 702, North Tower
Miami, Florida 33131
(305) 358-7771
May_____, 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).................................... 15,000.00
Legal Fees and Disbursements...................................... $ 40,300.00
Accounting Fees................................................... $ 24,500.00
Transfer Agent Fees............................................... $ 3,440.00
Blue Sky Fees and Expenses........................................ 3,975.00
Selling Shareholders
Taxes, federal
Taxes and fees, state
TOTAL........................................................ $ 91,370.42
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,
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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 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.
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
Enrique Dillon 1,170,000 [12] 4/25/2000
Martin Dell'Oca 200,000 [13] 5/01/2000
</TABLE>
[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 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.
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[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.
(12) These shares were issued to Enrique Dillon pursuant to the terms of the
April 25, 2000 employment agreement with the Company.
(13) These shares were issued to Martin Dell'Oca pursuant to the terms of the
May 1, 2000 employment agreement with the Company.
ITEM 16. EXHIBITS.
(a) Exhibits
The following documents are incorporated herein by 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.
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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 by 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 by 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.
The following documents are incorporated herein by 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 by reference from the
Registrant's Form 8-K Report filed on December 3, 1999:
2. Acquisition Agreement and Exhibits attached thereto
The following documents are incorporated by reference from the
Registrant's Post Effective Amendment #3 to Form S-1 Registration Statement
filed with the Securities and Exchange Commission (the "Commission"), Commission
file No. #333-3074 on May 4, 2000.
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<PAGE>
10.1 March 14, 2000, Consulting Agreement between Nexland S.A. and the
Company
10.2 November 17, 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
99.3 November 17,1999, Executive Compensation Agreement between Gregory
Scott Levine and the Company
The following documents are incorporated by reference from the
Registrant's Form 10KA filed with the Securities and Exchange Commission (the
"Commission"), Commission File No. #333-3074 on May 22, 2000:
27 Financial Statements December 31, 1999, 1998 and 1997
The following documents are being filed herewith:
5. Consent and opinion of Allan M. Lerner, P.A.
23.1 Consent of Williams & Webster, P.S.
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 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
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<PAGE>
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.
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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 30th day of May, 2000
NEXLAND INC.
(formerly, Windstar Resources, Inc., formerly
Turtleback Mountain Gold Co., Inc.)
BY:/s/ Gregory Scott Levine
---------------------------
Gregory Scott Levine
President and Director
BY:/s/ Richard G. Steeves
-------------------------
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 May 31, 2000
Richard G. Steeves Member of the Board of Directors; Secretary May 31, 2000
</TABLE>
72
