Securities and Exchange Commission
Washington, D. C. 20549
_______________
Form 10-SB
______________
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934
WINNERS INTERNET NETWORK, INC.
(Name of registrant in its charter)
NEVADA 91-1844567
(State of incorporation) (I.R.S. Employer Identification No.)
145 Oviedo Street
St. Augustine, Florida 32084
(904)824-7447
(Address and telephone number of principal executive offices and principal
place of business)
________________
Securities registered pursuant to Section 12(b) of the Act:
None
________________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001
(Title of each class)
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Table of Contents
PART I
Item 1: Description of Business..........................................3
Item 2: Management's Discussion and Analysis or Plan of Operation........8
Item 3: Description of Properties........................................12
Item 4: Security Ownership of Certain Beneficial Owners and Management...12
Item 5: Directors, Executive Officers, Promoters and Control Persons.....14
Item 6: Executive Compensation...........................................15
Item 7: Certain Relationships and Related Transactions...................15
Item 8: Description of Securities.......................................15
PART II
Item 1: Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters...................................16
Item 2: Legal Proceedings...............................................16
Item 3: Changes in and Disagreements with Accountants...................16
Item 4: Recent Sales of Unregistered Securities ........................16
Item 5: Indemnification of Directors and Officer........................18
PART F/S
Index to Financial Statements..........................................18
PART III
Item 1: Index to and Description of Exhibits ....................... ..19
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FORWARD LOOKING STATEMENTS
In this registration statement references to "Winners Internet" "we,"
"us," and "our" refer to Winners Internet Network., Inc.
This Form 10-SB contains certain forward-looking statements. For this
purpose any statements contained in this Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended
to identify forward-looking statements. These statements by their nature
involve substantial risks and uncertainties, and actual results may differ
materially depending on a variety of factors, many of which are not within
Winners Internet's control. These factors include but are not limited to
economic conditions generally and in the industries in which Winners Internet
may participate; competition within Winners Internet's chosen industry,
including competition from much larger competitors; technological advances and
failure by Winners Internet to successfully develop business relationships.
PART I
ITEM 1: DESCRIPTION OF BUSINESS
Business Development
Winners Internet was incorporated in the state of Washington on May 23,
1967 as Empire Exploration, Inc. Empire Exploration was involved in the
business of purchasing and exploring mining properties but ceased such
operations in 1992. In July of 1988 Empire Exploration, Inc. changed its name
to Comstock-Empire International, Inc. ("Comstock-Empire"). Winners Internet
Network, Inc. was incorporated in the state of Nevada on July 16, 1997. On
July 21, 1997, Comstock-Empire merged with Winners Internet for the sole
purpose of changing its domicile from Washington to Nevada. Winners Internet
is a Nevada corporation authorized to do business in the state of Florida and
the countries of Austria and Liechtenstein.
On July 31, 1997 Winners Internet acquired Davki Agency LTD, a Delaware
corporation ("Davki Agency"). Davki Agency was incorporated on June 16, 1997
and held the license to the test prototype of proprietary software we
currently use. Pursuant to the terms of the acquisition Winners Internet
issued 8,000,000 common shares for 100% of the 1,500 common shares of Davki
Agency and Davki Agency became a wholly owned subsidiary of Winners Internet.
Davki Agency was later dissolved in December of 1997.
Winners Internet has recorded revenues for the ten month period ended
October 31, 1999, however, we recorded losses for the past two fiscal years.
Based on our short operating history and past losses, our independent
auditors, Michael Johnson & Co, LLC, express doubts regarding our ability to
continue as a going concern. An investment in our stock is very risky.
Potential investors should carefully consider the factors discussed in this
registration statement before purchasing our common stock.
Our Business
Winners Internet developed and owns proprietary software and technology
which processes financial data on the Internet and is linked to established
banking structures. Currently, the software and processing system are used
for Internet gaming pay outs for legally licensed Internet casinos and
sportsbooks. We have an administrative office located in St. Augustine,
Florida which manages our overall operations, including licensing agreements,
corporate accounting and communications with the public. Our European
Division, located in Ruggell, Liechtenstein, maintains, monitors and manages
our technical operations and accounting records. The European Division
programs software, creates upgrades as needed, monitors our bank processing,
and prepares graphics for our web site and for other publications. Our
multi-lingual programmers monitor the functions performed by this division.
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Winners Secure Online Financial Processing System ("Winners Processing
System").
Global Gaming Link Systems, Inc., a Liechtenstein company ("GGLS"),
developed the initial test prototype software which established an initial
database for Internet financial transactions. In 1997 Davki Agency signed an
exclusive ten (10) year agreement with GGLS for the rights to use this test
proprietary software. In 1998 Winners Internet secured exclusive use of this
technology and further developed the software from its initial test stage to
the completed and functioning system as we offer today. We call this software
our Winners Secure Online Financial Processing System ("Winners Processing
System"). Our software currently utilizes only upgraded technology that was
exclusively developed by Winners Internet. The previous test software is not
a functioning component of the technical and processing software technology
currently known as the Winners Processing System.
Our Winners Processing System provides a comprehensive system for the
management of financial accounts, accounting services and financial
transactions for Internet commerce. Our system allows an Internet transaction
to be completed totally on the Internet without requiring the transaction to
be processed through non-Internet banks. The Winners Processing System relies
on proprietary security protocols and we have purchased encryption software to
maintain the integrity of the transactions. Our system allows a vendor to
receive transactions from customers by Visa, Master Card, American Express,
Western Union, bank transfers and checks. It also has the capability to
identify stolen credit cards, process transactions in twelve major currencies
and allows the vendor to convert transactions into a currency requested by the
vendor. Currently, we accept financial transactions from sixteen (16)
countries and our Winners Processing System accepts U.S. dollars, Canadian
dollars, British pound, French franc, Swiss franc, Austrian schilling, German
Deutsche mark, Italian lira, Dutch guilder, Japanese yen, Belgium franc and
Australian dollar.
Internet industries are subject to rapid technological change and our
ability to successfully market our products, improve our products and to
respond effectively to new technological changes or new product announcements
will affect our results of operations. Other companies may develop new
technology and systems similar to ours which could materially affect our
results in operation. Our European Division continues to monitor our system
to ensure that we upgrade any part of our system where needed to maintain the
integrity and technological advance of all software and to enhance total
operations. We have not had major problems with our software, but we have
experienced minor "bugs" in the software and they have been remedied through
updates. We have experienced problems with our Internet service provider
which resulted in our Web site temporarily shutting down. In these instances
we have been non-operational for a few minutes up to a couple of hours. Since
we rely on third parties for Internet service we cannot assure the integrity
of our system at all times. However, we have now changed our Internet service
provider from Austria to Liechtenstein and have located our processing and
technical software in the same facility with out Internet service provider in
Liechtenstein.
CyberLink Monetary System
We rely on the CyberLink Monetary System to complete the processing of
Internet transactions using our Winners Processing System. The CyberLink
Monetary System is a data processing center based in Vaduz, Liechtenstein and
is the entity that provides the link between customers, products and services
and licensed banking. The CyberLink Monetary System is managed by
Intertreuhand Aktiengesellschaft with DDr. Reinhard Proksch serving as
Managing Director on their behalf. DDr. Proksch, a Fullbright Scholar, holds
dual doctorates in law and information systems.
Winners Internet became a member of the CyberLink Monetary System in July
1998 when CyberLink Monetary Systems agreed to exclusively license Winners
Internet as the sole provider of Internet gaming for its data processing
operations. Our Winners Processing System interfaces with the CyberLink
Monetary System's data processing and the financial transactions processed by
the CyberLink Monetary System are then interfaced with the bank accounts
managed by the CyberLink Monetary System.
The financial structure and established links we have with foreign banks
through the CyberLink Monetary System are a material aspect of our operations.
Should the CyberLink Monetary System falter or fail to perform its functions,
we could be severely affected.
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Global Gaming Link System ("Gaming System")
Our Winners Processing System and the CyberLink Monetary System provide
the technology and financial transaction structure for our Gaming System. Our
Gaming System provides a structure that ensures compliance with all existing
gaming laws, provides an audit mechanism for the host governments and players,
and provides a method for a player's funds to be processed through the
CyberLink Monetary System. Each casino or sportsbook must first apply for a
license with Winners Internet and then we recommend the licensee as a member
to the CyberLink Monetary System. The acceptance of each license remains
with the CyberLink Monetary System, who may not accept an application. All
licenses that have been submitted to the CyberLink Monetary System up to the
present time have been approved. As of December 1, 1999 we have 9 casinos, 7
sportsbooks, 1 cardroom, 1 lottery and 1 raffle which are licensed with
Winners Internet and have been approved by CyberLink Monetary Systems.
We believe our Gaming System provides credibility, uniformity, and
legality to Internet gaming. Currently, an Internet player goes to an
Internet gaming site and enters a charge card number or wires funds to the
site operator. If the player wins, he must wait for the casino to send him a
check, usually from a foreign jurisdiction. Then when he deposits the check
in his own account, he generally must wait 7-10 days for the check to be
processed. Meanwhile the casino may wait 30-45 days before the check is
cashed by the player. Using our Gaming System, the disbursements are made
daily with the player receiving payment which is immediately redeemable at a
local bank because the funds are in that jurisdiction's currency.
Once a casino becomes licensed with us, we require the casino to use our
system for all transactions. We must be able to maintain control of all
transactions in order to track all data and monitor all transactions to ensure
all processing adheres to existing laws and regulations. This requirement of
total control has caused potential client casinos and sportsbooks to decline
our services. Our Gaming System not only processes all incoming and outgoing
transmissions but also includes an entire accounting of the succession of each
entry which gives both the casino and the player a record of winnings and
losses. The player can access a separate accounting which provides account
information for all casinos that he has played which are using our Gaming
System. This also provides a means for the player to insure that records are
being maintained by the casino.
Our Gaming System uses the same method of payout for all of our licensed
Internet casinos regardless of the host site location. Daily currency
conversions are available, allowing players to be aware of the dollar or other
currency rates for play and payment.
Finally, our Gaming System is programmed to monitor transactions to
detect money laundering, violations of gaming laws and regulations and it
prevents payouts to a player located in any jurisdiction in which Internet
gaming is illegal.
Product Development
In July of 1998 CyberLink Monetary System began the development of the
CMS Debit Card. We anticipate that CyberLink Monetary System will provide the
CMS Debit Card for use in our Gaming System and other e-commerce operations.
This card will function like other bank cards, allowing the user to conduct
financial transactions on the Internet. We anticipate that it will provide a
means for complete accounting of all transactions for either our Internet
gaming or other e-commerce transactions. We anticipate that the CMS Debit
Card will provide recognition of parity of the Eurodollar and all foreign
currencies for Internet commerce. However, CyberLink Monetary System has
delayed the launching of the CMS Debit Card pending Internet gaming
legislation before the United States Congress. Any regulation changes would
require the CMS Debit Card to be redesigned with the necessary restrictions on
transactions programmed into the system or the card. As of the date of this
filing Congress has failed to make a definitive decision. Additionally, we
cannot assure that the CMS Debit Card will interface with our customers or
other vendors, nor that our CMS Debit Card can compete with debit cards now
available through other banks.
In February 1999 we entered into a licensing agreement with iChargeit,
located in Huntington Beach, California. iChargeit intends to create global
shopping cybermalls and has agreed that Winners Internet will have
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the exclusive right to process charge card activity for its cybermalls. We
anticipate iChargeit will provide a means for merchants to open an Internet
storefront using the iChargeit Global Storesonline suite of services.
Merchants will open a debit account with the CyberLink Monetary System and
receive payments for their stores e-sales in the currency of their choice and
accept payments in other currencies through the CMS Debit Card, when
functional.
iChargeit completed Phase I of its development plan when it established
the iChargeit Global Storesonline website in March of 1999. We currently are
in the process of opening an Internet portal between Winners Internet and
iChargeit which will allow us to process the financial transactions for
Shopping Downtown and a yet unnamed online auction site. We remain committed
to the iChargeit venture, however, Internet enterprises are being developed
daily and we cannot assure that iChargeit's cybermall will be able to compete
with other cybermalls or that the CMS Debit Card will be functional for use in
its cybermalls.
Distribution
We market our services and products through software licensing agreements
with distributors and casinos and sportbooks. We currently have four software
license agreements and two distributor agreements. Our license agreement
allows the licensee the non-exclusive right to process data by using our
software and, to load, use, and copy our software. The license may allow
single or multiple processor, single or multiple site, or a national license
which is a licensed domicile. The licensing agreement requires that the
licensee not have a criminal record, that the software be regarded as secret
and confidential and shall remain in the licensee's effective control. The
licensee is required to sign a confidentiality agreement as well. However,
these agreements may not effectively prevent copying and disclosure of our
technology and may not provide us with an adequate remedy if unauthorized
disclosure occurs.
These agreements may be terminated for failure to perform consistent with
its provisions, bankruptcy by the licensee or if the licensee conducts
business in an illegal territory. The license fee is a one-time fee of
$50,000. There is a yearly renewal fee for a license at $20,000 for
maintenance of the license which includes all upgrades and/or new versions of
our software to meet industry technical and graphic advances.
We offer two types of programs to our licensees, the full program and the
wager-in-only program. The full program assesses a 5.5% fee for
processing-in, which is the transfer of money from a player's debit account to
the licensee's gaming site. The full program also includes a 2.5% fee or a
$5.00 fee for withdrawals from the licensee's gaming site back to the player's
debit account, including payouts to winners. The wager-in-only program
assesses a 6.5% fee for the transfer of money from a player's debit account to
the licensee's gaming site. During 1999 we have generated $1,744,878 in
revenues from the processing fees for our licensing agreements.
We currently have two software distributor agreements. Our distributor
agreement grants the distributor the right to distribute the Gaming System in
a specific territory. We must approve all licenses and the distributor agrees
to promote our product and our good reputation. The distributor is not our
agent and the license cannot be assigned. The commission structure is 25% of
the paid and collected licensing fees and net processing fees.
Prior to August of 1999 we had executed a software distributor agreement
with Access World, Inc. Access World agreed to sell a minimum of 21 licenses
per year and it sold two licenses in 1998. Unfortunately we terminated our
agreement with Access World in August of 1999 due to a breach of the
contractual terms of that agreement.
We have negotiated contracts separate and apart from Access World, Inc.
We currently have two distributors who own the territorial marketing rights
for our software license in Australia and New Zealand and one for the
Caribbean. In December of 1998 Vaudeville Holding, Inc. became a licensed
distributor with the rights to sell the Gaming System in the assigned
territory of the Caribbean meaning, but not limited to, Antigua-Barbuda,
Aruba, the Bahamas, Belize, Costa Rica, Dominica, Dominican Republic, Granada
and St. Kitts. Vaudeville Holdings began its second year of on-line
processing with us and currently manages seven gaming web sites. In December
of 1998 we entered into a software distributor's licensing agreement with
Kenneth Hense, granting Mr.
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Hense the exclusive right to sell the Gaming System in the countries of
Australia and New Zealand. Neither Vaudeville Holding nor Kenneth Hense have
sold licenses in 1999.
Competition
Presently, there is no known direct competition to our Gaming System.
However, the Internet is a rapidly evolving market and there is always a
possibility that another company(ies) could develop a similar or superior
product, which may impede our growth and operations.
Additionally, we have upheld a rigorous standard for integrity and the
legality in processing Internet gaming transactions. This standard, which
management believed insured safe, legal and secure play, was not accepted by
most Internet casinos. We also endorsed further Internet gaming regulation
which was viewed unfavorably by Internet casinos. Management estimates that
there are over 350 Internet casinos in existence. We currently serve only 19
of those sites. As a result we have experienced lower than anticipated
revenues in the first months of our operations. This response from our
intended market prompted management to search out other uses for our
technology. Management believes our software's ability to track Internet
fraud and stolen credit cards improves the likelihood of our success in the
e-commerce market because management believes such security measures are
desired by this potential market.
Suppliers
We rely on four suppliers for computer equipment and training.
Computerhaus Gaechter, located in Feldkirch, Austria, supplied 74.7% of our
computer equipment during fiscal year 1998. Data Consultants, located in St.
Augustine, Florida supplied an additional 14.6% of such equipment and CompUSA
located in Jacksonville, Florida supplied 6%. Secure It 5550 located in
Norcross, Georgia, supplied computer secure systems representing 4.6% of our
computer equipment. We have not entered into long term manufacturing
contracts with any of the above suppliers. Management believes the loss of
any one of these suppliers would not have a material adverse effect on our
operations because the supplier could be replaced in 60 days.
Trademarks, License and Intellectual Property
Our proprietary software is a material aspect of our business. We rely
upon a combination of licenses, confidentiality agreements and other
contractual covenants to establish and protect our technology and other
intellectual property rights. If we infringe on the intellectual property of
another party we could be forced to seek a license to those intellectual
property rights of the third party. If we are required to obtain a license to
another party's proprietary rights, that license could be expensive, if we
could obtain it at all. Although we do not believe that our intellectual
property infringes on the rights of any other party, third-parties may assert
claims for infringement which may be successful or require substantial
resources to defend.
Our ability to compete effectively will depend in part on our ability to
maintain the proprietary nature of our technology through a combination of
exclusive licensing and the aggressive continued development of our products.
Competition in the Internet market is intense and there can be no assurance
that our competitors will not independently develop or obtain patents or
technologies that are substantially equivalent or superior to our technology.
Government Regulations
Our focus, from our inception, has been directed to foreign marketplaces
where Internet gaming is legal. Changes in government regulations toward
Internet gaming could affect our operations. United States citizens in
certain state jurisdictions, as well as those in many other countries, are
barred from Internet gaming. We currently do not process transactions for
any state or territory where gaming is illegal for its citizens. Should those
offshore governments that now allow Internet gaming negatively alter their
regulations toward the industry, the market for new customers would be greatly
reduced and could severely change our revenue projections, growth, and
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operations. We are monitoring developments in legislation throughout the
world and will adhere to all legislative decisions or regulations in this
regard.
Employees
We currently have sixteen (16) full time employees and two (2) part-time
employees. The Administration Division includes four employees and one part
time employee which are located in St. Augustine, Florida. Ten employees and
one part-time employee are employed in the European Division and are located
in Ruggell, Liechtenstein. We believe we have good relations with our
employees and none are covered by any collective bargaining agreement. We
anticipate employing two (2) additional employees for the Technical Division
within the next fiscal quarter.
Reports to Security Holders
We have voluntarily elected to file this Form 10-SB registration
statement in order to become a reporting company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Following the effective date of
this registration statement, we will be required to comply with the reporting
requirements of the Exchange Act. We will file annual, quarterly and other
reports with the Securities and Exchange Commission ("SEC"). We also will be
subject to the proxy solicitation requirements of the Exchange Act and,
accordingly, will furnish an annual report with audited financial statements
to our stockholders.
Interested persons may visit our web site at www.winr.net. We currently
use an investor relations firm, Columbia Financial Group, and interested
persons may call at (888) 301-6271. Columbia Financial provides investor
relations services, public relations services, publishing, advertising
services, fulfillment services as well as Internet related services. Columbia
Financial provides consulting services for a term of 15 months for a set fee,
which has been paid for with common stock and warrants. Either party may
terminate the agreement with 60 days written notice with certain conditional
repayments.
Available Information
Copies of this registration statement may be inspected, without charge,
at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0300. Copies of this material
also should be available through the Internet by using the SEC's EDGAR
Archive, which is located at http://www.sec.gov.
ITEM 2: MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
Winners Internet owns proprietary financial processing software that is
currently being used in Internet gaming payout structures. We commenced
operations in mid-December of 1998 and currently serve ten gaming websites
(See, Item: 1: Description of Business, above). We recognize revenue when
earned and we derive revenues from licensing fees, renewal fees, processing
fees and interest on our depository bank accounts. We recorded revenues during
the ten month interim period ended October 31, 1999 and have recorded a net
profit for that period, but in the previous two fiscal years we have posted
net losses.
From inception, the focus of our operations has been on Internet gaming
payout structures, but that market's rejection of our goal to function within
government regulations has forced us to move to other markets. To that end we
hope to develop e-commerce operations that will use our financial processing
system. Management believes our software and the banking relations we have
formed will allow a shift to e-commerce and that this diversification will
lessen our susceptibility to governmental changes in regulations and laws
related to Internet gaming. However, as with any new venture, we may
experience unanticipated difficulties which will prevent our expansion into
this market.
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Acquisition
On July 31, 1997 we acquired Davki Agency as a wholly owned subsidiary
through a tax free stock-for-stock exchange structured pursuant to Section 368
(a)(1)(B) of Internal Revenue Code of 1986, as amended. We issued 8,000,000
restricted common shares to the nine shareholders of Davki Agency in exchange
for their 1,500 common shares. Davki Agency owned the test prototype of
financial processing software which we later developed into our Winners
Processing System. Davki Agency was subsequently dissolved in December of
1997.
Liquidity and Capital Resources
Since our inception we have financed our operations primarily through
private placements of equity securities. During fiscal years 1997 and 1998 we
established our operations and in December of 1998 we granted our first
licenses to customers and distributors, but we failed to generate revenues
until January of 1999. Management believes that the ratio of expenses to
revenues will remain relatively constant now that licensing agreements are in
place. However, each licensee has the option to not renew the license after a
term of one year. If several licensees opt to not renew we could experience a
decrease in our revenues.
During the interim period ended October 31, 1999 we have experienced
increased revenues as a result of processing and licensing fees. As of
October 31, 1999 cash reserves totaled $693,253 with total current assets of
$2,718,122. 74.4% of the total current assets are represented by accounts
receivable. We posted operating losses during fiscal years 1998 and 1997, but
we have posted a net income of $1,129,215 for the 1999 interim period. Our
total current liabilities were $821,785 as of October 31, 1999 with $809,374
representing accounts payable, which are funds in our possession being
processed and which will subsequently be disbursed to vendors, less any
processing fees. Our principal commitments as of October 31, 1999 are $2,683
per month for office leases.
A summary of our audited balance sheets for the years ended December 31,
1998 and 1997 and our balance sheet for the ten month interim period ended
October 31, 1999 are as follows:
Interim Period
Years Ended December 31 Ended October 31
1997 1998 1999
-------------- ------------- -----------------
Cash/Cash Equivalents $ 0 $ 28,857 $ 693,253
Current Assets 0 28,857 2,718,122
Total Assets 282,150 204,272 2,891,651
Total Current Liabilities 281,368 13,621 821,785
Total Stockholders' Equity 782 190,651 2,069,886
Total Liabilities &
Stockholder Equity 282,150 204,272 2,891,651
We have relied on equity transactions for funding of our business
operations. During fiscal year 1997 we sold 2,539,912 common shares for
$112,700. During fiscal year 1998 we sold an aggregate of 2,435,000 common
shares for $919,750. During the interim period ended October 31, 1999 we sold
an aggregate of 788,158 common shares for $522,500. We have also issued
common shares in exchange for services rendered to us by third-parties.
Specifically, we issued an aggregate of 1,521,358 common shares during 1998
for payments for our software and for computer equipment. During 1999 we
issued 410,000 shares for technical services. (See, "Recent Sales of
Unregistered Securities").
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We anticipate that we will need up to $10,000,000 to enter into the
e-commerce market. We expect that we will need additional programmers, staff
and technical support, as well as, another facility in Europe to house
additional processing equipment to manage the anticipated e-commerce
transactions. Management will evaluate our needs as we expand into this new
area of operations and we may need to form new alliances with other Internet
companies before we realize an expansion into the e-commerce market. Also,
due to the dynamic nature of the Internet market we cannot assure that we will
be able to compete in this new market.
We anticipate the need for additional funds and we are currently
evaluating the availability of external financing. However, we can not assure
that funds will be available from any source, or, if available, that we will
be able to obtain the funds on terms agreeable to us. Also, the acquisition
of funding through the issuance of debt could result in a substantial portion
of our cash flows from operations being dedicated to the payment of principal
and interest on the indebtedness, and could render us more vulnerable to
competitive and economic downturns.
Any future securities offerings will be effected in compliance with
applicable exemptions under federal and state laws. The purchasers and manner
of issuance will be determined according to exemptions available to us. At
this time we expect to offer securities to raise additional funds, however, we
have not determined the type of offering or the type or number of securities
which we will offer. We have no plans to make a public offering of our common
stock at this time. We also note that if we issue more shares of our common
stock our shareholders may experience dilution in the value per share of their
common stock.
Results of Operations
The following table summarizes the results of our operations for the
fiscal years ended December 31, 1998 and 1997 and for the ten month interim
period ended October 31, 1999 and 1998.
Interim Period Interim Period
Years Ended December 31 Ended October 31 Ended October 31
1997 1998 1998 1999
----------- ----------- ---------------- ----------------
Revenues $ 8,604 $ 2,168 $ 2,168 $ 1,749,878
Total Operating
Expense 120,522 842,728 538,581 620,663
Net Profit (loss) (111,918) (840,560) (536,413) 1,129,215
1997 to 1998
Revenues for the fiscal year ended December 31, 1998 were $2,168, which
represented a decrease from the $8,604 recorded for the fiscal year ended
December 31, 1997. These revenues were received from consulting services
provided to one of our licensees starting in 1997, and the bulk of the
consulting services were provided in 1997.
Operating expenses for the fiscal year 1998 were $842,728 which
represented an increase from the $111,918 recorded for the fiscal year 1997.
This increase is reflective of the expansion of our operations, including
increased office and equipment expenditures, hiring of additional employees,
expenses associated with Internet use, increased travel costs, increased
expenditures for marketing and advertising, as well as costs of our financing
activities.
During fiscal year 1997 our operating activities provided $187,300
whereas in fiscal year 1998 our operating activities used $1,091,968 because
of our expansion into Europe. We eliminated a payable to Global Gaming Link
Systems, LTD for the software test prototype which resulted in our investing
activities providing
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$300,000 in fiscal year 1997, compared to $94,335 used for investing
activities in fiscal year 1998. For fiscal year 1997 our financing activities
provided $18,893 from the sale of our common stock compared to $1,026,473 for
fiscal year 1998.
October 31, 1998 Compared to October 31,1999
Our results of operation for the interim period ended October 31, 1999
represents operations conducted in our European processing and licensing
operations. Revenues during the 1999 interim period totaled $1,749,878 with
$1,744,878 generated from our European processing operations and the remaining
$5,000 coming from license income generated in the Unites States. Our $2,168
in revenues during the 1998 interim period were received from consulting fees.
Total operating expenses for the 1999 interim period were $620,663 which
were 35.4% of the total revenues, compared to $538,581 operating expenses in
the 1998 interim period which were 248.4% of revenues. Operating expenses in
the 1998 interim period reflected start-up costs of our operations, including
marketing expenses posted at $175,000, wages at $112,440, travel at $70,191
and $50,000 in commissions from our financing activities.
Expenses in the 1999 interim period were reflective of continuing
operations. Wages and travel were the largest line items for the interim
period with $227,543 and $119,985, respectively. The expenses for operations
in the United States were primarily from administrative expense items such as
payroll, professional and legal fees, taxes, etc. In comparison the European
expenses were attributed to labor, consulting fees, office expenses, travel
and bank charges.
Net cash used by our operating activities was $754,082 for the 1998
interim period compared to $339,778 provided by our operations for the 1999
interim period. Net cash provided by investing activities was $3,022 for the
1998 interim period compared to capital expenditures of $172,122 for offering
expenses during the 1999 interim period. Sales of our common stock provided
$791,950 for the 1998 interim period, compared to $146,490 for the 1999
interim period.
OTC Bulletin Board Eligibility Rule
In January of 1999, the SEC granted approval of amendments to the NASD
OTC Bulletin Board Eligibility Rule 6530 and 6540. These amendments now
require a company listed on the OTC Bulletin Board to be a reporting company
and current in its reports filed with the SEC. As a result of this rule
change we have voluntarily filed this registration statement in order to
become a fully reporting company and maintain the listing of our common stock
on the OTC Bulletin Board. The rule requires that the SEC come to a position
of no further comment regarding the registration statement before a company is
considered compliant. We cannot assure that the SEC will come to such a
position in regards to this registration statement prior to our phase-in-date
of May 1, 2000. According to the rules, if we are not in compliance at our
phase-in-date our common stock will be removed from the OTC Bulletin Board. At
that time we intend to move our listing to the National Quotation Bureau's
Pink Sheets. This possible move to the "pink sheets" may adversely affect the
market, if any, in our stock.
Year 2000 Compliance
We have completed a review of our computer systems and operations to
determine the extent to which our business will be vulnerable to potential
errors and failures as a result of the "Year 2000" problem. Year 2000 errors
could result in system failures or miscalculations, causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, provide services or engage in similar activities.
Our computer systems, Winners Processing System, the Gaming System and
the CyberLink Monetary System are Year 2000 compliant. Our suppliers,
distributors and licensees have indicated that they are also Year 2000
compliant. In the worst case scenario we may experience a decrease in
revenues because of technical difficulties related to our licensees' business
operations. Our contingency plan is to have technical support teams
11
<PAGE>
and developers on site in our computer operation facilities in Austria and
Liechtenstein on December 31, 1999 through January 1, 2000 to provide
technical support for the transition into the new century.
ITEM 3: DESCRIPTION OF PROPERTIES
Our principal business office in the United States is located in St.
Augustine, Florida. We lease 2,106 square feet of office space in an
individual unit. We have a three year lease which expires March 30, 2001 and
management believes this facility is adequate for our anticipated growth in
the United States. We pay $1,683 per month for this lease, and the agreement
does not provide for termination, other than by a court process.
In August of 1999 we leased the top floor of a three story building
located in Ruggell, Liechtenstein, which is approximately 10,000 square feet
and houses our technical operations. This facility has state-of-the-art
security and is made of concrete construction and will allow for limited
future expansion, if needed. The lease has a monthly rent of $1,000 and is a
month-to-month open-end lease for a term of one year. The rent will not
change for a twelve month period from the date of said lease and thereafter
will be reviewed for a potential cost-of-living increase anticipated to be
between 5-8%.
ITEM 4: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our
outstanding common stock of; (i) each person or group known by us to own
beneficially more than 5% of our outstanding common stock, (ii) each of our
executive officers, (iii) each of our director's and (iv) all executive
officers and directors as a group. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Except as indicated by footnote,
the persons named in the table below have sole voting power and investment
power with respect to all shares of common stock shown as beneficial ownership
of those shares. The percentage of beneficial ownership is based on
16,186,613 shares of common stock, 15,990,863 outstanding as of October 31,
1999 and 195,750 shares subject to options under our employee stock option
plan.
CERTAIN BENEFICIAL OWNERS
Common Stock Beneficially Owned
-------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- ------------------------------- ---------------------- ---------------------
David Skinner, Sr. 1,610,000 9.9%
126 Staghorn Hollow
Beech Mountain, North Carolina
28604
Kimberly Stein 1,130,000 6.9%
1005 Baron Lane
Myrtle Beach, South Carolina
12
<PAGE>
MANAGEMENT
Common Stock Beneficially Owned
-------------------------------
Name and Address of Number of Shares of
Beneficial Owners Common Stock Percentage of Class
- --------------------------------- ---------------------- --------------------
David Skinner, Jr. 1,263,750 7.8%
145 Oviedo Street
St. Augustine, Florida 32084
Charles E. Scott 990,000 6.1%
145 Oviedo Street
St. Augustine, Florida 32084
Ronald Oehri 10,000 *
Schlattstrasse 215 FL-9491
Ruggell, Liechtenstein
Chad Millward 15,000 *
Schlattstrasse 215 FL-9491
Ruggell, Liechtenstein
All executive officers and
directors as a group 2,278,750 14.0%
* Less than 1%
The following chart lists shares and options held by management
Securities
Common Stock underlying Options
--------------- ------------------
Mr. Skinner 1,210,000 53,750
Mr. Scott 960,000 30,000
Mr. Millward 0 15,000
Mr. Oehri 10,000 0
Options are exercisable upon issuance at $0.50 per share. None of the options
have been exercised as of the date of this filing.
13
<PAGE>
ITEM 5: DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Our directors, executive officers and key employees and their respective
ages and positions are set forth below. Biographical information for each of
those persons is also presented below. Our bylaws require three (3) directors
and our executive officers are appointed by our Board of Directors and serve
at its discretion.
Directors and Officers
Name Age Position Held
- ---------------------- ------- ----------------
David C. Skinner, Jr. 31 President, CEO, Treasurer, Director
Charles E. Scott 33 Vice President, Chief Technical Officer
Chad A. Millward 27 Secretary, Director
Ronald Oehri 40 Director
David C. Skinner, Jr. Mr. Skinner was appointed Chairman of the Board,
President and Treasurer on June 1, 1997. In July of 1999 he was re-elected
President and CEO. From January 1995 he managed Skinner, Varney & Associates,
a tax and business consulting firm. In 1996, Mr. Skinner was affiliated with
Grand Holiday Casino of Aruba, where he managed the payout structure for an
international sportsbook. From 1995 to 1997 he was employed by Enterprise
Distributors, Inc., who made video gaming devices. In 1996 he served as a
President of Caribbean Palace, Inc. (Club Casablanca) of Myrtle Beach, South
Carolina.
Charles E. Scott. Mr. Scott was appointed Vice President Technical on
June 1, 1997. He was elected Vice President and appointed Chief Technical
Officer in July of 1999. From 1995 to 1997, he was employed by Skinner,
Varney & Associates as an office administrator. From 1996 to 1998 he was
employed by Telephone Information System Services in Curacao where he designed
and implemented secure Internet and intranet access to multiple sportsbooks.
He received a bachelors degree in computer information systems from Florida
State University.
Chad A. Millward. Mr. Millward was elected as a Director and appointed
Secretary in July of 1999. He was our Chief Systems Administrator since April
of 1999. Prior to joining Winners Internet he was a United States Air Force
Network Administrator since 1993.
Ronald Oehri. Mr. Oehri was elected as a Director in July of 1999. From
January 1, 1999 to the present he has been the C.E.O. of Quality Net AG which
provides Internet marketing. Since September 1997 he has been the C.E.O. of
SupraNet AG which is an Internet service provider. Beginning in December 1984
through the present he has been the C.E.O. of Koro AG, a trading company.
14
<PAGE>
ITEM 6: EXECUTIVE COMPENSATION
The following table shows compensation of our executive officers for our
fiscal year 1998.
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
Fiscal
Name and Principal Position Year Salary ($) Bonus Other
- --------------------------- -------- ----------- -------- ---------
David Skinner Jr. 1998 $ 79,914 $ 0 $ 44,520*
President, C.E.O.
Charles E. Scott 1998 50,900 0 0
Vice President, Chief
Technical Officer
*The Company owns a 1998 Ford Explorer vehicle which has been
purchased for corporate use by the President/CEO, Mr. Skinner.
Compensation of Directors
We do not have any standard arrangement for compensation of our directors
for any services provided as director, including services for committee
participation or for special assignments.
Employment Contracts
As of the date of this filing we have not entered into formal employment
agreements with our executive officers.
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions either we
engaged in during the past two years or we propose to engage in involving our
executive officers, directors, 5% stockholders or immediate family members of
such persons:
In July of 1999 we entered into an agreement with SupraNet AG for
Internet services. Mr Oehri, our director, is the President and C.E.O. of
SupraNet AG. The monthly fee for the services provided to Winners Internet by
SupraNet AG is $1,340 per month and the agreement provides a 30 day opt-out
clause for either party.
ITEM 8: DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 50,000,000 shares of common stock, par value
$.001, of which 15,990,863 were issued and outstanding as of October 31, 1999.
All shares of common stock have equal rights and privileges with respect to
voting, liquidation and dividend rights. Each share of common stock entitles
the holder thereof (i) to one non-cumulative vote for each share held of
record of all matters submitted to a vote of the stockholders, (ii) to
participate equally and to receive any and all such dividends as may be
declared by the Board of Directors out of funds legally available; and (iii)
to participate pro rata in any distribution of assets available for
distribution upon
15
<PAGE>
liquidation of the Company. Our stockholders have no preemptive rights to
acquire additional shares of common stock or any other securities.
Preferred Stock
We have not authorized preferred stock.
PART II
ITEM 1: MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
Our common stock is traded over-the-counter and quoted on the OTC NASDAQ
Electronic Bulletin Board under the symbol "WINR". The following table
represents the range of the high and low bid prices of our stock as reported
by the Nasdaq Trading and Market Services for each fiscal quarter for the last
two fiscal years ending December 31, 1998 and the nine month interim period
ended September 30, 1999. There was no market activity prior to August 1997.
Such quotations represent prices between dealers and may not include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions.
Year Quarter High Low
-------- ---------------- ------ -----
1997 Third Quarter 4.875 2.25
Fourth Quarter 2.8125 0.375
1998 First Quarter 0.8125 0.15
Second Quarter 1 0.40625
Third Quarter 1.625 0.33
Fourth Quarter 3.00 0.45
1999 First Quarter 2.96875 1.34
Second Quarter 2.4375 1.21875
Third Quarter 1.71875 0.8125
We have approximately 614 stockholders of record as of October 31, 1999.
We have not declared dividends on our common stock and do not anticipate
paying dividends on our common stock in the foreseeable future. On July 14,
1997 we effected an 100-to-1 reverse stock split. All per share information in
this registration statement has been retroactively restated to reflect this
change.
ITEM 2: LEGAL PROCEEDINGS
We are not a party to any proceedings or threatened proceedings as of the
date of this filing.
ITEM 3: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
We have had no change in, or disagreements with, our principal
independent accountant during our last two fiscal years.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
The following discussion describes all securities we have sold within the
past three fiscal years without registration.
16
<PAGE>
On January 31, 1997 we issued an aggregate of 600 common shares to three
of our then officers and directors for services rendered on our behalf. The
services were valued at $20.00 each and each received 200 shares. The
issuance of such shares was exempt from registration under the Securities Act
of 1933 by reason of Sections 3(b) and 4(2) as a private transaction not
involving a public distribution.
On March 7, 1997 we issued 4,076 common shares to four persons for
accounting and legal services. Such services were valued at $407.00. The
issuance of such shares was exempt from registration under the Securities Act
of 1933 by reason of Sections 3(b) and 4(2) as a private transaction not
involving a public
distribution.
On August 1, 1997 we sold 2,500,000 common shares for $50,000 to five
persons. Such shares were issued pursuant to Rule 504.
On September 15, 1997 we sold 17,145 common shares to Tom Curtis for
$30,000. Such shares were issued pursuant to Rule 504.
On December 19, 1997 we sold 20,000 common shares to Capital
Communications, Inc. for $10,000. Such shares were issued pursuant to Rule
504.
On April 28, 1998 we issued 500,000 common shares valued at $50,000 to
Columbia Financial Group for public relations services. Such shares were
issued pursuant to Rule 504.
On May 7, 1998 we sold an aggregate of 1,000,000 common shares for
$300,000 to Cognitive Investco, Inc. and Epicontinental Holding's Limited.
Each purchased 500,000 common shares and such shares were issued pursuant to
Rule 504.
On May 19, 1998 we sold 500,000 common shares for $200,000 to Codecraft
Corporation, Inc. Such shares were issued pursuant to Rule 504.
On July 20, 1998 we issued 500,000 common shares to Intertreuhand
Aktiengesellschaft in consideration for technology and services. Such shares
were valued at $25,000. The issuance of such shares was exempt from
registration under the Securities Act of 1933 by reason of Sections 3(b) and
4(2) as a private transaction not involving a public distribution.
On August 18, 1998 we sold an aggregate of 550,000 common shares for
$220,000. Columbia Financial Group purchased 150,000 common shares and
Codecraft Corporation purchased 400,000 common shares. Such shares were
issued pursuant to Rule 504.
On November 1, 1998 we sold 285,000 common shares for $99,750 to
Cognitive Investco, Inc. Such shares were issued pursuant to Rule 504.
On December 4, 1998 we issued 21,358 common shares to Intertreuhand
Aktiengesellschaft for computer equipment valued at $10,679. The issuance of
such shares was exempt from registration under the Securities Act of 1933 by
reason of Sections 3(b) and 4(2) as a private transaction not involving a
public distribution.
On December 15, 1998 we issued 500,000 common shares to Columbia
Financial Group pursuant to Rule 505. Such shares were valued at $25,000 and
were issued for public relations services provided to us.
On December 22, 1998 we sold 100,000 common shares for $100,000 to
Codecraft Corporation. Such shares were issued pursuant to Rule 504.
On January 8, 1999 we sold 100,000 common shares for $100,000 to
Cognitive Investco, Inc. Such shares were issued pursuant to Rule 504.
17
<PAGE>
On March 25, 1999 we sold 225,000 common shares for $202,500 to Bluegrass
Secure Corp. Such shares were issued pursuant to Rule 504.
On June 18, 1999 we issued 10,000 common shares valued at $7,498 to
Ronald Oehri for technology services rendered. The issuance of such shares was
exempt from registration under the Securities Act of 1933 by reason of
Sections 3(b) and 4(2) as a private transaction not involving a public
distribution.
On July 15, 1999 we sold 400,000 common shares for $220,000 to
Trans-Pacific Security Consultants. Such shares were issued pursuant to Rule
504.
On September 28, 1999 we sold 315,789 common shares for $149,999 to
Orienstar Finance, Ltd. Such shares were issued pursuant to Rule 504.
On October 1, 1999 we sold 147,369 common shares to Orienstar Finance,
Ltd. for $70,000. Such shares were issued pursuant to Rule 504.
In connection with each of these private transactions of our securities
listed above, we believe that each purchaser (i) was aware that the securities
had not been registered under federal securities laws, (ii) acquired the
securities for his/her/its own account for investment purposes and not with a
view to or for resale in connection with any distribution for purpose of the
federal securities laws, (iii) understood that the securities would need to be
indefinitely held unless registered or an exemption from registration applied
to a proposed disposition and (iv) was aware that the certificate representing
the securities would bear a legend restricting their transfer. We believe
that, in light of the foregoing, the sale of our securities to the respective
acquirers did not constitute the sale of an unregistered security in violation
of the federal securities laws and regulations by reason of the exemptions
provided under Sections 3(b) and 4(2) of the Securities Act, and the rules and
regulations promulgated thereunder.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Nevada Revised Statutes Section 78.7502 and 78.751 our
Articles of Incorporation and bylaws provide for the indemnification of
present and former directors and officers and each person who serves at our
request as our officer or director. We will indemnify such individuals
against all costs, expenses and liabilities incurred in a threatened, pending
or completed action, suit or proceeding brought because such individual is our
director or officer. Such individual must have conducted himself in good
faith and reasonably believed that his conduct was in, or not opposed to, our
best interest. In a criminal action he must not have had a reasonable cause
to believe his conduct was unlawful. This right of indemnification shall not
be exclusive of other rights the individual is entitled to as a matter of law
or otherwise.
We will not indemnify an individual adjudged liable due to his negligence
or wilful misconduct toward us, adjudged liable to us, or if he improperly
received personal benefit. Indemnification in a derivative action is limited
to reasonable expenses incurred in connection with the proceeding. Also, we
are authorized to purchase insurance on behalf of an individual for
liabilities incurred whether or not we would have the power or obligation to
indemnify him pursuant to our bylaws.
Our bylaws provide that individuals may receive advances for expenses if
the individual provides a written affirmation of his good faith belief that
the has met the appropriate standards of conduct and he will repay the advance
if he is adjudged not to have met the standard of conduct.
PART F/S
INDEX TO FINANCIAL STATEMENTS
Winners Internet Financial Statements for the period ended October 31, 1999
(unaudited)
Winners Internet Financial Statements for the period ended December 31, 1998
(and 1997)
18
<PAGE>
WINNERS INTERNET NETWORK, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED OCTOBER 31, 1999
(UNAUDITED)
<PAGE>
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Telephone: (303)796-0099
Fax: (303)796-0137
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Winners Internet Network, Inc.
St. Augustine, FL
We have done a compilation of the accompanying balance sheet of Winners
Internet Network, Inc. (WIN) as of October 31, 1999 and the related statements
of operations, stockholders' equity, and cash flows for the period then ended,
in accordance with Statements of Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting, in the form of financial statements,
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any form of assurance on them.
/s/ Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, Colorado
December 17, 1999
<PAGE>
WINNERS INTERNET NETWORK, INC.
Consolidated Balance Sheet
For the Period Ended October 31
(Unaudited)
1999 1998
------------- -------------
SSETS:
Current Assets:
Cash in Bank $ 31,651 $ 34,863
Cash in Bank - LGT Vaduz 60,954 -
Cash in Bank - BTV Austria 600,648 -
Accounts Receivable - Europe 433,229 -
Accounts Receivable - Austria 1,591,640 -
------------- -------------
Total Current Assets 2,718,122 34,863
Fixed Assets:
GGLS Software 75,000 300,000
Equipment 85,801 73,236
Furniture & Fixtures 4,489 4,489
Vehicle 44,802 -
Less Depreciation (61,563) (17,850)
------------- -------------
Total Fixed Assets 148,529 359,875
Other Assets:
Prepaid Marketing 25,000 75,000
------------- -------------
Total Other Assets 25,000 75,000
TOTAL ASSETS $ 2,891,651 $ 469,738
============== =============
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 809,374 $ 1,430
Accrued Expenses 9 100
Note Payable - Ford Credit 12,402 -
------------- -------------
Total Current Liabilities 821,785 1,530
Stockholders' Equity
Common Stock, par value $0.001: 50,000,000
shares authorized; 15,990,863 shares issued
and outstanding for 1999, and 13,884,856
shares issued and outstanding for 1998. 15,991 13,885
Additional Paid-In Capital 2,948,093 2,390,770
Accumulated Deficit (894,218) (1,936,447)
------------- -------------
Total Stockholders' Equity 2,069,866 468,208
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 2,891,651 $ 469,738
============= =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Consolidated Statement of Operations
For the Period Ended October 31
(Unaudited)
1999 1998
------------- -------------
REVENUE:
Processing Income $ 1,744,878 $ -
License Income 5,000 -
Consulting Income - 2,168
------------- -------------
Total Revenue 1,749,878 2,168
EXPENSES:
504 Commission $ 12,500 $ 50,000
Advertising 300 158
Auto Expense 332 -
Bank Charges 2,112 343
Consulting Fees 9,600 34,997
Contract Labor 46,547 -
Dues & Subscriptions 2,395 2,201
Insurance 14,790 1,329
Internet 17,300 18,333
Marketing - 175,000
Meals & Entertainment 45,140 565
Office Expenses 7,769 1,837
Postage & Freight 776 503
Professional & Legal Fees 24,583 8,648
Rent 46,763 8,416
Rent of Equipment 473 4,110
Royalties - 26,450
Security 222 263
Taxes & Licenses 1,676 19,444
Telephone 28,117 3,108
Travel 119,985 70,191
Utilities 11,740 245
Wages 227,543 112,440
------------- -------------
Total Expenses 620,663 538,581
------------- -------------
NET PROFIT $ 1,129,215 $ (536,413)
============= =============
NET PROFIT PER (LOSS) COMMON STOCK $ 0.07 $ (0.05)
------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING 15,843,494 11,168,189
------------- -------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Stockholders' Equity
October 31, 1999
(Unaudited)
<TABLE>
<CAPTION> COMMON STOCKS Additional Accumulate Total
----------------------- Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Davki Agency Ltd., Inc. Merger 8,000,000 8,000 359,287 (367,287) -
Comstock/Empire International, Inc.
Merger 294,944 295 703,373 (703,668) -
Issuance of Stock for Cash & Services 2,539,912 2,540 110,160 - 112,700
Net Deficit 12/31/97 - - - (111,918) (111,918)
------------- ---------- ------------- ------------ -------------
Balance December 31, 1997 10,834,856 10,835 1,172,820 (1,182,873) 782
============= ========== ============= ============ =============
Issuance of 4/28 for Services 500,000 500 49,500 - 50,000
Issuance of 5/7 for Cash 1,000,000 1,000 299,000 - 300,000
Issuance of 5/19 for Cash 500,000 500 199,500 - 200,000
Issuance of 7/20 for Services 500,000 500 24,500 - 25,000
Issuance of 8/18 for Cash 550,000 550 219,450 - 220,000
Issuance of 11/1 for Cash 285,000 285 99,465 - 99,750
Issuance of 12/4 for Services 21,358 21 10,658 - 10,679
Issuance of 12/15 for Services 500,000 500 24,500 - 25,000
Issuance of 12/22 for Cash 100,000 100 99,900 - 100,000
Issuance Correction 12/31
(Comstock Merger) 141 - - - -
Net Deficit 12/31/98 - - - (840,560) (840,560)
------------- ---------- ------------- ------------ -------------
Balance December 31, 1998 14,791,355 14,791 2,199,293 (2,023,433) 190,651
============= ========== ============= ============ =============
Issuance on 1/8/99 for Cash 100,000 100 99,900 - 100,000
Issuance on 3/25/99 for Cash 225,000 225 202,275 - 202,500
Issuance on 6/18/99 for Services 10,000 10 7,488 - 7,498
Issuance Correction 6/30
(Comstock Merger) 1350 2 - - 2
Issuance on 7/15/99 for Services 400,000 400 219,600 - 220,000
Issuance on 9/28/99 for Services 315,789 316 149,684 - 150,000
Issuance on 10/11/99 for Cash 147,369 147 69,853 - 70,000
Net Profit 10/31/99 - - - 1,129,215 1,129,215
------------- ---------- ------------- ------------ -------------
Balance October 31, 1999 15,990,863 $ 15,991 $ 2,948,093 $ (894,218) $ 2,069,866
============= ========== ============= ============ =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
WINNERS INTERNET NETWORK, INC.
Consolidated Statement of Cash Flow
For the Period Ended October 31
(Unaudited)
1999 1998
------------- -------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,129,215 $ (781,352)
CHANGES IN ASSETS & LIABILITIES:
Depreciation (43,713) (17,850)
Accounts Payable (807,944) 20
Accrued Expenses (91) (29,900)
Notes Payable - Ford Credit 12,402 -
Prepaid Expenses (91) -
Prepaid Marketing 50,000 75,000
------------- -------------
Net Cash Provided by Operating Activities 339,778 (754,082)
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Capital Expenditure 172,122 (3,022)
------------- -------------
Net Cash Used for Investing Activities 172,122 (3,022)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Ordinary Shares 146,490 791,950
------------- -------------
Net Cash Provided by Financing 146,490 791,950
Net Cash in Cash & Cash Equivalents 658,390 34,846
Cash & Cash Equivalents at Beginning of Period 34,863 17
------------- -------------
Cash & Cash Equivalents at End of Period $ 693,253 $ 34,863
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest - -
============= =============
Income Taxes - -
============= =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Notes to Financial Statements
October 31, 1999
(Unaudited)
Note 1 - Organization and Summary of Significant Accounting Policies:
Organization:
- ------------
On July 14, 1997, Winners Internet Network, Inc. (WIN) was incorporated under
the laws of Nevada. The Company's fiscal year end is December 31. On July
15, 1997 Winners Internet Network, Inc. and Comstock-Empire International,
Inc., a Washington Corporation merged pursuant to 368(a)(1)(A) and
368(a)(1)(F) of the Internal Revenue Code of 1986 as amended. Comstock-Empire
merged into WIN, acquiring all issued and outstanding shares of Comstock-
Empire for and in exchange for 294,944 shares of WIN common stock. On July 31,
1997 Winners Internet Network, Inc. and Davki Agency LTD, Inc., a Delaware
Corporation, merged in a plan of reorganization. WIN acquired all issued and
outstanding shares of Davki Agency LTD, Inc. for and in exchange of 8,000,000
shares of WIN common stock. This stock transfer is pursuant to 368(a)(1)(B)
of Internal Revenue code of 1986 as amended, as a tax-free exchange. The
Davki Agency LTD, Inc. became a wholly owned subsidiary of WIN.
Basis of Presentation:
- ----------------------
The Company is primarily engaged in the operation of an Internet Gaming Pay-
out structure. The authorized capital stock of the corporation is 20,000,000
shares of common stock $.001. On March 17, 1998 the authorized capital stock
of the corporation was increased to 50,000,000 shares of common stock.
Cash and Cash Equivalents:
- -------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of three
months, to be cash equivalents.
Property and Equipment:
- -----------------------
Property and equipment is stated at cost. The cost of ordinary maintenance
and repairs is charged to operations while renewals and replacements are
capitalized. Depreciation is figured on a straight-line basis as follows:
Computer Software 15 years
Equipment 5 years
Furniture & Fixtures 10 years
Vehicle 7 years
<PAGE>
WINNERS INTERNET NETWORK, INC.
Notes to Financial Statements
October 31, 1999
Revenue Recognition:
- -------------------
Revenue is recognized when earned and expenses are recognized when they occur.
Use of estimates:
- ----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note 2 Federal Income Taxes:
The Company adopted statement of financial Accounting Standards No. 109,
"Accounting For Income Taxes." FAS 109 requires the recognition of deferred
tax liabilities and assets for the anticipated future tax effects of temporary
differences that arise as a result of differences in the carrying amounts and
tax bases of assets and liabilities. There was no material effect on the
financial statements as a result of adopting FAS 109.
<PAGE>
WINNERS INTERNET NETWORK, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<PAGE>
Michael Johnson & Co., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Telephone: (303)796-0099
Fax: (303)796-0137
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Winners Internet Network, Inc.
St. Augustine, FL
We have audited the accompanying balance sheet of Winners Internet Network,
Inc. as of December 31, 1998 and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As shown in the financial statements, the company incurred a net loss of
$840,560 for 1998 and a net loss of $111,918 for 1997. These factors indicate
that the company has substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the company cannot continue in existence.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Winners Internet Network,
Inc., as of December 31, 1998 and the results of their operations and their
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Michael Johnson & Co., LLC
Michael Johnson & Co., LLC
Denver, Colorado
December 16, 1999
<PAGE>
WINNERS INTERNET NETWORK, INC.
Balance Sheet
For the Period Ended December 31, 1998
With Comparative Totals for December 31, 1997
1998 1997
------------- ------------
ASSETS:
Current Assets:
Cash in Bank $ 28,857 $ -
------------- ------------
Total Current Assets 28,857 -
Fixed Assets:
GGLS Software 75,000 300,000
Equipment 84,289 -
Furniture & Fixtures 4,469 -
Vehicle 44,520 -
Less Depreciation (61,563) (17,850)
------------- ------------
Total Fixed Assets 146,715 282,150
Other Assets:
Loan Receivable - D. Skinner, Jr. 3,700 -
Prepaid Marketing 25,000 -
------------- ------------
28,700 -
TOTAL ASSETS $ 204,272 $ 282,150
============= ============
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts Payable $ 427 $ 1,368
Advances Payable - 30,000
Payroll Taxes Payable (1,326) -
GGLS Payable - 250,000
Note Payable - Ford Credit 14,520 -
------------- ------------
Total Current Liabilities 13,621 281,368
Stockholders' Equity
Common Stock, par value $0.001: 50,000,000
shares authorized; 14,791,355 shares issued
and outstanding for 1998, and 10,834,856
shares issued and outstanding for 1997 14,791 10,835
Additional Paid-In Capital 2,199,293 1,172,820
Accumulated Deficit (2,023,433) (1,182,873)
------------- ------------
Total Stockholders' Equity 190,651 782
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 204,272 $ 282,150
============= ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Consolidated Statement of Operations
For the Period Ended December 31, 1998
With Comparative Totals for December 31, 1997
1998 1997
------------- ------------
REVENUE:
Consulting Income $ 2,168 $ 8,604
------------- ------------
Total Revenue 2,168 8,604
EXPENSES:
504 Commission 179,750 418
Advertising 285 -
Bank Charges 490 829
Consulting Fees 71,297 2,000
Depreciation Expense 43,713 17,850
Dues & Subscriptions 2,301 95
Education 5,109 -
FICA Expense 17,176 -
Furniture Lease 2,674 -
Insurance 5,398 1,246
Internet 18,333 -
Maintenance & Repairs 922 35
Marketing Expense 50,000 -
Meals & Entertainment 387 -
Merger Expenses - 13,923
Miscellaneous Expense 548 -
Office Expenses 2,128 74
Postage & Freight 1,068 49
Professional & Legal Fees 13,311 -
Rent 32,499 -
Rent of Equipment 394 -
Royalties 26,450 -
Security 485 -
Taxes & Licenses 2,243 159
Telephone 11,370 2,622
Travel 110,630 22,837
Utilities 494 -
VAT Tax 9,414 -
Wages 233,859 58,385
------------- ------------
Total Expenses 842,728 120,522
------------- ------------
NET PROFIT $ (840,560) $ (111,918)
============= ============
NET PROFIT PER COMMON STOCK $ (0.06) $ (0.001)
------------- ------------
WEIGHTED AVERAGE SHARES OUTSTANDING 13,988,450 9,931,951
------------- ------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Stockholders' Equity
December 31, 1998
<TABLE>
<CAPTION> COMMON STOCKS Additional Accumulated Total
----------------------- Paid-in Earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Davki Agency Ltd., Inc. Merger 8,000,000 8,000 359,287 (367,287) -
Comstock/Empire International, Inc.
Merger 294,944 295 703,373 (703,668) -
Issuance of Stock for Cash & Services 2,539,912 2,540 110,160 - 112,700
Net Deficit 12/31/97 - - - (111,918) (111,918)
------------- ---------- ------------- ------------ -------------
Balance December 31, 1997 10,834,856 10,835 1,172,820 (1,182,873) 782
============= ========== ============= ============ =============
Issuance of 4/28 for Services 500,000 500 49,500 - 50,000
Issuance of 5/7 for Cash 1,000,000 1,000 299,000 - 300,000
Issuance of 5/19 for Cash 500,000 500 199,500 - 200,000
Issuance of 7/20 for Services 500,000 500 24,500 - 25,000
Issuance of 8/18 for Cash 550,000 550 219,450 - 220,000
Issuance of 11/1 for Cash 285,000 285 99,465 - 99,750
Issuance of 12/4 for Services 21,358 21 10,658 - 10,679
Issuance of 12/15 for Services 500,000 500 24,500 - 25,000
Issuance of 12/22 for Cash 100,000 100 99,900 - 100,000
Issuance Correction 12/31
(Comstock Merger) 141 - - - -
Net Deficit 12/31/98 - - - (840,560) (840,560)
------------- ---------- ------------- ------------ -------------
Balance December 31, 1998 14,791,355 $ 14,791 $ 2,199,293 $(2,023,433) $ 190,651
============= ========== ============= ============ =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
WINNERS INTERNET NETWORK, INC.
Consolidated Statement of Cash Flows
For the Period Ended December 31, 1998
With Comparative Totals for December 31, 1997
1998 1997
------------- ------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss $ (840,560) $ (111,918)
Depreciation 43,713 17,850
CHANGES IN ASSETS & LIABILITIES:
GGLS Payable (250,000) 250,000
Accounts Payable (941) 1,368
Advances Payable (30,000) 30,000
Notes Payable - Ford Credit 14,520 -
Loan Receivable (3,700) -
Prepaid Marketing (25,000) -
------------- ------------
Net Cash Provided by Operating Activities (1,091,968) 187,300
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Capital Expenditure 94,335 (300,000)
------------- ------------
Net Cash Used for Investing Activities 94,335 (300,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Ordinary Shares 1,026,473 18,893
------------- ------------
Net Cash Provided by Financing 1,026,473 18,893
Net Cash in Cash & Cash Equivalents 28,840 (93,807)
Cash & Cash Equivalents at Beginning of Period 17 -
------------- ------------
Cash & Cash Equivalents at End of Period $ 28,857 $ (93,807)
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest - -
Income Taxes - -
The accompanying notes are an integral part of these financial statements.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Notes to Financial Statements
December 31, 1998
Note 1 - Organization and Summary of Significant Accounting Policies:
Organization:
- ------------
On July 14, 1997, Winners Internet Network, Inc. (WIN) was incorporated under
the laws of Nevada. The Company's fiscal year end is December 31. On July
15, 1997 Winners Internet Network, Inc. and Comstock-Empire International,
Inc., a Washington Corporation merged pursuant to 368(a)(1)(A) and
368(a)(1)(F) of the Internal Revenue Code of 1986 as amended. Comstock-Empire
merged into WIN, acquiring all issued and outstanding shares of Comstock-
Empire for and in exchange for 294,944 shares of WIN common stock. On July 31,
1997 Winners Internet Network, Inc. and Davki Agency LTD, Inc., a Delaware
Corporation, merged in a plan of reorganization. WIN acquired all issued and
outstanding shares of Davki Agency LTD, Inc. for and in exchange of 8,000,000
shares of WIN common stock. This stock transfer is pursuant to 368(a)(1)(B)
of Internal Revenue code of 1986 as amended, as a tax-free exchange. The
Davki Agency LTD, Inc. became a wholly owned subsidiary of WIN.
Basis of Presentation:
- ---------------------
The Company is primarily engaged in the operation of an Internet Gaming Pay-
out structure. The authorized capital stock of the corporation is 20,000,000
shares of common stock with a par value of $.001. On March 17, 1998 the
authorized capital stock of the corporation was increased to 50,000,000 shares
of common stock.
Cash and Cash Equivalents:
- -------------------------
The Company considers all highly liquid debt instruments, purchased with an
original maturity of three
months, to be cash equivalents.
Property and Equipment:
- ----------------------
Property and equipment is stated at cost. The cost of ordinary maintenance
and repairs is charged to operations while renewals and replacements are
capitalized. Depreciation is figured on a straight-line basis as follows:
Computer Software 15 years
Equipment 5 years
Furniture & Fixtures 10 years
Vehicle 7 years
Revenue Recognition:
- -------------------
Revenue is recognized when earned and expenses are recognized when they occur.
<PAGE>
WINNERS INTERNET NETWORK, INC.
Notes to Financial Statements
December 31, 1998
GGLS Payable
- ------------
In 1997 the software was acquired from Global Gaming Link Systems, LTD. for
$300,000, $250,000 as a payable to GGLS and a down payment of $50,000. This
payable was paid in 1998 with an issuance of 500,000 shares of common stock.
The payable for GGLS was eliminated in July, 1998 when the stocks were
cancelled and reissued to Intertreuhand Aktiengesellschaft in as much as the
software was no longer held by GGLS and was obtained from Intertreuhand.
Use of estimates:
- ----------------
The preparation of financial statements, in conformity with generally accepted
accounting principles, requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note 2 Going Concern:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of
the Company as a going concern. However, the Company has sustained a
substantial operation loss this year. As shown in the financial statements,
the Company incurred a net loss of $840,560 for 1998 and a net loss of
$111,918 for 1997. These factors indicate that the Company has substantial
doubt about its ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue
in existence.
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, and the success of its future operations. Management
believes that actions presently being taken to revise the Company's operating
and financial requirements provide the opportunity for the Company to continue
as a going concern.
Note 3 Subsequent Event
In mid-December, 1998 the Austrian Subsidiary started operations by signing up
their first casino. All travel and marketing expenses to start this operation
were paid in 1998 by Winners Internet Network, Inc.
<PAGE>
PART III
ITEM 1: INDEX TO AND DESCRIPTION OF EXHIBITS
Exhibit Number Description Location
- --------------- ---------------- --------
2.1 Articles of Incorporation of Winners Internet,
dated July 16, 1997 See attached
2.2 Articles of Merger, dated July 21, 1997 See attached
2.3 Certificate of Share Exchange,
dated August 4, 1997 See attached
2.4 Certificate of Amendment to Articles of
Incorporation, dated March 18, 1998 See attached
2.5 Bylaws of Winners Internet See attached
3.1 Winners Internet Directors, Officers and
Employees Stock Option Plan 1999 See attached
6.1 Lease between Winners Internet and Charles
Fazio, Sr., dated April 10, 1998 See attached
6.2 Consultant Agreement between Winners
Internet and Columbia Financial Group,
dated December 15, 1998 See attached
8.1 Agreement and Plan of Reorganization
Between Winners Internet and Davki
Agency, dated July 31, 1997
27 Financial Data Schedule See attached
________________________
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, who are duly authorized.
Date: December 23, 1999
WINNERS INTERNET NETWORK, INC.
/s/ David C. Skinner, Jr.
By: ___________________________________
David C. Skinner, Jr., President and CEO
<July 16, 1997 date stamp for the Secretary of State
for the State of Nevada appears here- NO. C15271-97>
ARTICLES OF INCORPORATION
OF
WINNERS INTERNET NETWORK, INC.
The undersigned, natural person of eighteen years or more of age, acting as
incorporator of a Corporation (the "Corporation") under the Nevada Revised
Statutes, adopts the following Articles of Incorporation for the Corporation:
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is Winners Internet Network, Inc.
ARTICLE II
SHARES
The amount of the total authorized capital stock of the Corporation is
20,000,000 shares of common stock, par value $.001 per share. Each share of
common stock shall have one (1) vote. Such stock may be issued from time to
time without any action by the stockholders for such consideration as may be
fixed from time to time by the Board of Directors, and shares so issued, the
full consideration for which has been paid or delivered, shall be deemed the
full paid up stock, and the holder of such shares shall not be liable for any
further payment thereof. Said stock shall not be subject to assessment to pay
the debts of the Corporation, and no paid-up stock and no stock issued as
fully paid, shall ever be assessed or assessable by the Corporation.
The Corporation is authorized to issue 20,000,000 shares of common stock, par
value $.001 per share.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of the initial registered office of the Corporation is 1025
Ridgeview, Suite 400, Reno, Nevada 89509 and the name of its initial
registered agent at such address is Michael J. Morrison.
ARTICLE IV
INCORPORATOR
The name and address of the incorporator is:
NAME ADDRESS
Anita Patterson 215 South State Street, Suite 1100
Salt Lake City, Utah 84111
ARTICLE V
DIRECTORS
The members of the governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be increased or
decreased in such manner as shall be provided by the bylaws of the
Corporation, provided that the number of directors shall not be reduced to
less than one (1). The name and post office address of the first board of
directors, which shall be one in number, is as follows:
NAME ADDRESS
Michael Otto 157 South 1200 East
Salt Lake City, Utah 84102
ARTICLE VI
GENERAL
A. The board of directors shall have the power and authority to make and
alter, or amend, the bylaws, to fix the amount in cash or otherwise, to be
reserved as working capital, and to authorize and cause to be executed the
mortgages and liens upon the property and franchises of the Corporation.
B. The board of directors shall, from time to time, determine whether, and to
what extent, and at which times and places, and under what conditions and
regulations, the accounts and books of this Corporation, or any of them, shall
be open to the inspection of the stockholders; and no stockholder shall have
the right to inspect any account, book or document of this Corporation except
as conferred by the Statutes of Nevada, or authorized by the directors or any
resolution of the stockholders.
C. No sale, conveyance, transfer, exchange or other disposition of all or
substantially all of the property and assets of this Corporation shall be made
unless approved by the vote or written consent of the stockholders entitled to
exercise two-thirds (2/3) of the voting power of the Corporation.
D. The stockholders and directors shall have the power to hold their
meetings, and keep the books, documents and papers of the Corporation outside
of the State of Nevada, and at such place as may from time to time be
designated by the bylaws or by resolution of the board of directors or
stockholders, except as otherwise required by the laws of the State of Nevada.
E. The Corporation shall indemnify each present and future officer and
director of the Corporation and each person who serves at the request of the
Corporation as an officer or director of the Corporation, whether or not such
person is also an officer or director of the Corporation, against all costs,
expenses and liabilities, including the amounts of judgments, amounts paid in
compromise settlements and amounts paid for services of counsel and other
related expenses, which may be incurred by or imposed on him in connection
with any claim, action, suit, proceeding, investigation or inquiry hereafter
made, instituted or threatened in which he may be involved as a party or
otherwise by reason of any past or future action taken or authorized and
approved by him or any omission to act as such officer or director, at the
time of the incurring or imposition of such costs, expenses, or liabilities,
except such costs, expenses or liabilities as shall relate to matters as to
which he shall in such action, suit or proceeding, be finally adjudged to be
liable by reason of his negligence or willful misconduct toward the
Corporation or such other Corporation in the performance of his duties as such
officer or director, as to whether or not a director or officer was liable by
reason of his negligence or willful misconduct toward the Corporation or such
other Corporation in the performance of his duties as such officer or
director, in the absence of such final adjudication of the existence of such
liability, the board of directors and each officer and director may
conclusively rely upon an opinion of legal counsel selected by or in the
manner designed by the board of directors. The foregoing right of
indemnification shall not be exclusive of other rights to which any such
officer or director may be entitled as a matter of law or otherwise, and shall
inure to the benefit of the heirs, executors, administrators and assigns of
each officer or director.
The undersigned being the individual named in Article III, above, as the
initial registered agent of the Corporation, hereby consents to such
appointment.
Michael J. Morrison
The undersigned incorporator executed these Articles of Incorporation,
certifying that the facts herein stated are true this 14th day of July, 1997.
/s/ Anita Patterson
- -------------------
ANITA PATTERSON
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On this 14th day of July, 1997, personally appeared before me Anita Patterson,
personally known to me or proved to me on the basis of satisfactory evidence
to be the person whose name is signed on the preceding document, and
acknowledged to me that she signed it voluntarily for its stated purpose.
/s/ John Clayton
- ----------------
NOTARY PUBLIC
<Notary stamp for John Clayton appears here>
CERTIFICATE OF ACCEPTANCE
OF APPOINTMENT BY RESIDENT AGENT
In the matter of Winners Internet Network, Inc., I Michael J. Morrison, with
address at 1025 Ridgeview Drive, Suite 400, Reno, Nevada 89509, hereby accept
appointment as resident agent of the above-named corporation in accordance
with NRS 78.090.
Furthermore, that the mailing address for the above registered offfice is 1025
Ridgeview Drive, Suite 400, Reno, Nevada 89509.
IN WITNESS WHEREOF, I hereonto set my hand this 15th day of July, 1997.
By: /s/ Michael J. Morrison
-----------------------
Michael J. Morrison, Resident Agent
<Stamp appears: FILED
STATE OF NEVADA
JUL 21 1997
SECRETARY OF STATE>
ARTICLES OF MERGER FOR
WINNERS INTERNET NETWORK, INC.,
A NEVADA CORPORATION
Pursuant to the provisions of Section 78.458 of the Nevada Revised Statutes,
Winners Internet Network, Inc., a Nevada corporation (the "Corporation"),
hereby adopts and files the following Articles of Merger as the surviving
corporation to the merger of Comstock-Empire International, Inc., a Washington
corporation ("Comstock"), with and into the Corporation:
FIRST: The name and place of incorporation of each corporation which is a
party to this merger is as follows:
Name Place of Incorporation
Comstock-Empire International, Inc. Washington
Winners Internet Network, Inc. Nevada
SECOND: The Agreement and Plan of Merger (the "Plan") governing the merger
between the Corporation and Comstock, has been adopted by the Board of
Directors of the Corporation and Comstock.
THIRD: The approval of the shareholders of the Corporation and Comstock was
required to effectuate the merger. The number of shares of stock outstanding
in each of the corporations (and the number of votes entitled to be cast) as
of the date of the adoption of the Plan was as follows:
Entity Type of Shares Number of Shares Outstanding
Comstock-Empire
International, Inc. Common 29,494,400
Winners Internet Network, Inc. Common 100
The number of shares of stock of each corporation which voted for and against
the Plan was as follows:
Entity Type of Shares For Against
Comstock-Empire International, Inc. Common 20,000,000 0
Winners Internet Network, Inc. Common 100 0
FOURTH: The number of votes cast for the Plan by each voting group entitled
to vote was sufficient for approval of the merger by each such voting group.
FIFTH: Following the merger there are no amendments to the Articles of
Incorporation of the surviving company.
SIXTH: The complete executed Plan is on file at the registered office or
other place of business of the Corporation.
SEVENTH: The Plan of merger is attached hereto.
EIGHTH: The merger will be effective upon the filing of the Articles of
Merger.
DATED this 14th day of July, 1997.
WINNERS INTERNET NETWORK, INC., a Nevada corporation
By /s/ Michael Otto
- -------------------
Michael Otto, President
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 14th day of July, 1997, personally appeared before me Michael Otto,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that he is the President of Winners
Internet Network, Inc., and that said document was signed by him in behalf of
said corporation by authority of its bylaws, and said Michael Otto
acknowledged to me that said corporation executed the same.
John Clayton
- ------------
NOTARY PUBLIC
<Notary Stamp of John Clayton appears here>
By /s/ Michael Otto
- -------------------
Michael Otto, Secretary
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 14th day of July, 1997, personally appeared before me Michael Otto,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that he is the Secretary of Winners
Internet Network, Inc., and that said document was signed by him in behalf of
said corporation by authority of its bylaws, and said Michael Otto
acknowledged to me that said corporation executed the same.
John Clayton
- ------------
NOTARY PUBLIC
<Notary stamp for John Clayton appears here>
COMSTOCK-EMPIRE INTERNATIONAL, INC.
By /s/ John W. Peters
- ---------------------
John W. Peters, President
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 14th day of July, 1997, personally appeared before me John W. Peters,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that he is the President of Comstock-
Empire International, Inc. and that said document was signed by him in behalf
of said corporation by authority of its bylaws, and said John W. Peters
acknowledged to me that said corporation executed the same.
John Clayton
- ------------
NOTARY PUBLIC
<Notary Stamp for John Clayton appears here>
By /s/ Anita Patterson
- ----------------------
Anita Patterson, Secretary
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On the 18th day of July, 1997, personally appeared before me Anita Patterson,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that she is the Secretary of
Comstock-Empire International, Inc. and that said document was signed by her
in behalf of said corporation by authority of its bylaws, and said Anita
Patterson acknowledged to me that said corporation executed the same.
John Clayton
- ------------
NOTARY PUBLIC
<Notary Public stamp appears here>
<August 4, 1997 date stamp for the Secretary of State
for the State of Nevada appears here C15271-97>
ARTICLES OF SHARE EXCHANGE FOR
WINNERS INTERNET NETWORK, INC.,
A NEVADA CORPORATION
Pursuant to the provisions of Section 78.458 of the Nevada Revised Statutes,
Winners Internet Network, Inc., a Nevada corporation (the "Corporation") and
The Davki Agency, Inc., a Delaware corporation ("Davki"), hereby adopts and
files the following Articles of Share Exchange:
FIRST: The name and place of incorporation of each corporation which is a
party to this share exchange is as follows:
NAME PLACE OF INCORPORATION
Winners Internet Network, Inc.
(the acquiring corporation) Nevada
The Davki Agency, Inc.
(the acquired corporation) Delaware
SECOND: The Plan of Reorganization (the "Plan") governing the share exchange
between the Corporation and Davki, has been adopted by the Boards of Directors
of the Corporation and Davki.
THIRD: The Plan has been consented to by the shareholders of the corporation
owning a majority of the issued and outstanding shares of the sole class of
voting common stock of the corporation and all of the shareholders of Davki.
The number of shares of stock outstanding in each of the corporations (and the
number of votes entitled to be cast) as of the date of the adoption of the
Plan was as follows:
ENTITY TYPE OF SHARES NUMBER OF SHARES OUTSTANDING
Winners Internet
Network, Inc. Common 299,494
The Davki Agency, Inc. Common 100
The number of shares of stock of each corporation which voted for or consented
to the Plan was as follows:
ENTITY TYPE OF SHARES FOR AGAINST
Winners Internet
Network, Inc. Common 20,000 0
The Davki Agency, Inc. Common 100 0
FOURTH: The number of votes cast for or consenting to the Plan by each voting
group entitled to vote was sufficient for approval of the share exchange by
each such voting group.
FIFTH: The complete executed Plan is on file at the registered office or
other place of business of the Corporation.
SIXTH: A copy of the Plan will be furnished by the Corporation, on request
and without cost, to any shareholder of either corporation which is a party to
the share exchange.
SEVENTH: The share exchange is effective upon filing.
DATED this 31st day of July, 1997.
/s/ Michael Otto
- ----------------
President
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On this 31st day of July, 1997, personally appeared before me Michael Otto,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that he is the President of Winners
Internet Network, Inc., and that said document was signed by him in behalf of
said corporation by authority of its bylaws, and said Michael Otto
acknowledged to me that said corporation executed the same.
/s/ John Clayton
- -------------
NOTARY PUBLIC
<Notary stamp for John Clayton appears here>
/s/ Michael Otto
- ------------
Secretary
STATE OF UTAH )
: ss.
COUNTY OF SALT LAKE )
On this 31st day of July, 1997, personally appeared before me Michael Otto,
personally known to me or proved to me on the basis of satisfactory evidence,
and who, being by me duly sworn, did say that he is the Secretary of Winners
Internet Network, Inc., and that said document was signed by him in behalf of
said corporation by authority of its bylaws, and said Michael Otto
acknowledged to me that said corporation executed the same.
/s/John Clayton
- ------------
NOTARY PUBLIC
<Notary stamp for John Clayton appears here>
<March 18, 1998 date stamp for the Secretary of State
for the State of Nevada appears here>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
WINNERS INTERNET NETWORK, INC.
We the undersigned as President and Secretary of Winners Internet Network,
Inc. (the "Corporation") do hereby certify:
That the Board of Directors of said Corporation at a Winners Internet Network,
Inc. meeting duly convened and held via telephone on the 17th day of March,
1998 adopted a Resolution to amend the original Articles as follows:
A.Delete Article II in its entirety and substitute in its place the following:
ARTICLE II
The Corporation shall have the authority to issue Fifty Million (50,000,000)
shares of common stock with a par value of $.001 per share. All stock of the
Corporation shall be of the same class, and shall have the same rights and
preferences, fully paid stock shall not be liable to any further call or
assessment.
Said amendment has been consented to and approved by the owners of majority of
the duly issued and outstanding shares of common stock which represent a
majority of the sole class of common stock outstanding and entitled to vote
thereon. The change is effective immediately upon the filing of this
Certificate.
/s/ David Skinner, Jr.
- -----------------------------
David Skinner, Jr., President
/s/ Sandra Varney
- -----------------
Sandra Varney, Secretary/Treasurer
STATE OF FLORIDA )
: ss.
COUNTY OF ST. JOHNS )
On this 18 day of March, 1998, personally appeared before me David
Skinner, Jr. and Sandra Varney personally known to me or provided to me on the
basis of satisfactory evidence to be the persons whose names are signed on the
preceding document, and acknowledged to me that they signed it voluntarily for
its stated purpose.
/s/ J. Larae Long
- -----------------
Notary Public
<Notary public stamp appears here>
BYLAWS
OF
WINNERS INTERNET NETWORK, INC.
ARTICLE 1. OFFICES
1.1 Business Office. The principal office of the corporation shall be
located at any place either within or outside the State of Nevada as
designated in the corporation's most recent document on file with the Nevada
Secretary of State, Division of Corporations. The corporation may have such
other offices, either within or without the State of Nevada as the board of
directors may designate or as the business of the corporation may require from
time to time.
1.2 Registered Office. The registered office of the corporation shall
be located within the State of Nevada and may be, but need not be, identical
with the principal office. The address of the registered office may be
changed from time to time.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Shareholder Meeting. The annual meeting of the shareholders
shall be held on the 15th day of July in each year, beginning with the year
1998 at the hour of 2:00 p.m., or at such other time on such other day within
such month as shall be fixed by the board of directors, for the purpose of
electing directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Nevada, such meeting shall be held on the next
succeeding business day.
2.2 Special Shareholder Meeting. Special meetings of the shareholders,
for any purpose or purposes described in the meeting notice, may be called by
the president, or by the board of directors, and shall be called by the
president at the request of the holders of not less than one-fourth of all
outstanding votes of the corporation entitled to be cast on any issue at the
meeting.
2.3 Place of Shareholder Meeting. The board of directors may designate
any place, either within or without the State of Nevada, as the place of
meeting for any annual or any special meeting of the shareholders, unless by
written consent, which may be in the form of waivers of notice or otherwise,
all shareholders entitled to vote at the meeting designate a different place,
either within or without the State of Nevada, as the place for the holding of
such meeting. If no designation is made by either the directors or unanimous
action of the voting shareholders, the place of meeting shall be at 215 South
State Street #1100, Salt Lake City, Utah 84111.
2.4 Notice of Shareholder Meeting. Written notice stating the date,
time, and place of any annual or special shareholder meeting shall be
delivered not less than 10 nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the
President, the board of directors, or other persons calling the meeting, to
each shareholder of record entitled to vote at such meeting and to any other
shareholder entitled by the Nevada Revised Statutes (the "Statutes") or the
articles of incorporation to receive notice of the meeting. Notice shall be
deemed to be effective at the earlier of: (1) when deposited in the United
States mail, addressed to the shareholder at his address as it appears on the
stock transfer books of the corporation, with postage thereon prepaid; (2) on
the date shown on the return receipt if sent by registered or certified mail,
return receipt requested, and the receipt is signed by or on behalf of the
addressee; (3) when received; or (4) 3 days after deposit in the United States
mail, if mailed postpaid and correctly addressed to an address other than that
shown in the corporation's current record of shareholders.
If any shareholder meeting is adjourned to a different date, time or
place, notice need not be given of the new date, time and place, if the new
date, time and place is announced at the meeting before adjournment. But if
the adjournment is for more than 30 days or if a new record date for the
adjourned meeting is or must be fixed, then notice must be given pursuant to
the requirements of the previous paragraph, to those persons who are
shareholders as of the new record date.
2.5 Waiver of Notice. A shareholder may waive any notice required by
the Statutes, the articles of incorporation, or these bylaws, by a writing
signed by the shareholder entitled to the notice, which is delivered to the
corporation (either before or after the date and time stated in the notice)
for inclusion in the minutes or filing with the corporate records.
A shareholder's attendance at a meeting:
(a) waives objection to lack of notice or defective notice of
the meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and
(b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when
it is presented.
2.6 Fixing of Record Date. For the purpose of determining shareholders
of any voting group entitled to notice of or to vote at any meeting of
shareholders, or shareholders entitled to receive payment of any distribution,
or in order to make a determination of shareholders for any other proper
purpose, the board of directors may fix in advance a date as the record date.
Such record date shall not be more than 70 days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is so fixed by the board for the determination of
shareholders entitled to notice of, or to vote at a meeting of shareholders,
the record date for determination of such shareholders shall be at the close
of business on the day the first notice is delivered to shareholders. If no
record date is fixed by the board for the determination of shareholders
entitled to receive a distribution, the record date shall be the date the
board authorizes the distribution. With respect to actions taken in writing
without a meeting, the record date shall be the date the first shareholder
signs the consent.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination
shall apply to any adjournment thereof unless the board of directors fixes a
new record date which it must do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting.
2.7 Shareholder List. After fixing a record date for a shareholder
meeting, the corporation shall prepare a list of the names of its shareholders
entitled to be given notice of the meeting. The shareholder list must be
available for inspection by any shareholder, beginning on the earlier of 10
days before the meeting for which the list was prepared or 2 business days
after notice of the meeting is given for which the list was prepared and
continuing through the meeting, and any adjournment thereof. The list shall
be available at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting is to be held.
2.8 Shareholder Quorum and Voting Requirements.
2.8.1 Quorum. Except as otherwise required by the Statutes or the
articles of incorporation, a majority of the outstanding shares of the
corporation, represented by person or by proxy, shall constitute a quorum at
each meeting of the shareholders. If a quorum exists, action on a matter,
other than the election of directors, is approved if the votes cast favoring
the action exceed the votes cast opposing the action, unless the articles of
incorporation or the Statutes require a greater number of affirmative votes.
2.8.2 Voting of Shares. Unless otherwise provided in the articles
of incorporation or these bylaws, each outstanding share, regardless of class,
is entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
2.9 Quorum and Voting requirements of Voting Groups. If the articles of
incorporation or the Statutes provide for voting by a single voting group on a
matter, action on that matter is taken when voted upon by that voting group.
Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for
that adjourned meeting.
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Statutes provide
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
If the articles of incorporation or the Statutes provide for voting by
two or more voting groups on a matter, action on that matter is taken only
when voted upon by each of those voting groups counted separately. Action may
be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter.
If a quorum exists, action on a matter, other than the election of
directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless
the articles of incorporation or the Statutes require a greater number of
affirmative votes.
2.10 Greater Quorum or Voting Requirements. The articles of
incorporation may provide for a greater quorum or voting requirement for
shareholders, or voting groups of shareholders, than is provided for by these
bylaws. An amendment to the articles of incorporation that adds, changes, or
deletes a greater quorum or voting requirement for shareholders must meet the
same quorum requirement and be adopted by the same vote and voting groups
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
in person or by proxy which is executed in writing by the shareholder or which
is executed by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the corporation or other person authorized to
tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in
the proxy. All proxies are revocable unless they meet specific requirements
of irrevocability set forth in the Statutes. The death or incapacity of a
voter does not invalidate a proxy unless the corporation is put on notice. A
transferee for value who receives shares subject to an irrevocable proxy, can
revoke the proxy if he had no notice of the proxy.
2.12 Corporation's Acceptance of Votes.
2.12.1 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation corresponds to the name of a
shareholder, the corporation, if acting in good faith, is entitled to accept
the vote, consent, waiver, proxy appointment, or proxy appointment revocation
and give it effect as the act of the shareholder.
2.12.2 If the name signed on a vote, consent, waiver, proxy
appointment, or proxy appointment revocation does not correspond to the name
of a shareholder, the corporation, if acting in good faith, is nevertheless
entitled to accept the vote, consent, waiver, proxy appointment, or proxy
appointment revocation and give it effect as the act of the shareholder if:
(a) the shareholder is an entity as defined in the Statutes
and the name signed purports to be that of an officer or agent of the entity;
(b) the name signed purports to be that of an administrator,
executor, guardian, or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the
corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(c) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment, or proxy appointment
revocation; or
(d) the name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation; or
(e) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-owners and the person signing appears to be acting on behalf of all
co-tenants or fiduciaries.
2.12.3 If shares are registered in the names of two or more
persons, whether fiduciaries, members of a partnership, co-tenants, husband
and wife as community property, voting trustees, persons entitled to vote
under a shareholder voting agreement or otherwise, or if two or more persons
(including proxy holders) have the same fiduciary relationship respecting the
same shares, unless the secretary of the corporation or other officer or agent
entitled to tabulate votes is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect to voting
shall have the following effect:
(a) if only one votes, such act binds all;
(b) if more than one votes, the act of the majority so voting
bind all;
(c) if more than one votes, but the vote is evenly split on
any particular matter, each fraction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that
any tenancy is held in unequal interests, a majority or even split for the
purpose of this Section shall be a majority or even split in interest.
2.12.4 The corporation is entitled to reject a vote, consent,
waiver, proxy appointment or proxy appointment revocation if the secretary or
other officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
2.12.5 The corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
are not liable in damages to the shareholder for the consequences of the
acceptance or rejection.
2.12.6 Corporate action based on the acceptance or rejection of a
vote, consent, waiver, proxy appointment or proxy appointment revocation under
this Section is valid unless a court of competent jurisdiction determines
otherwise.
2.13 Action by Shareholders Without a Meeting.
2.13.1 Written Consent. Any action required or permitted to be
taken at a meeting of the shareholders may be taken without a meeting and
without prior notice if one or more consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shareholders entitled to vote
with respect to the subject matter thereof were present and voted. Action
taken under this Section has the same effect as action taken at a duly called
and convened meeting of shareholders and may be described as such in any
document.
2.13.2 Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (i) those
shareholders entitled to vote who did not consent in writing, and (ii) those
shareholders not entitled to vote. Any such notice must be accompanied by the
same material that is required under the Statutes to be sent in a notice of
meeting at which the proposed action would have been submitted to the
shareholders for action.
2.13.3 Effective Date and Revocation of Consents. No action taken
pursuant to this Section shall be effective unless all written consents
necessary to support the action are received by the corporation within a
sixty-day period and not revoked. Such action is effective as of the date the
last written consent is received necessary to effect the action, unless all of
the written consents specify an earlier or later date as the effective date of
the action. Any shareholder giving a written consent pursuant to this Section
may revoke the consent by a signed writing describing the action and stating
that the consent is revoked, provided that such writing is received by the
corporation prior to the effective date of the action.
2.13.4 Unanimous Consent for Election of Directors.
Notwithstanding subsection (a), directors may not be elected by written
consent unless such consent is unanimous by all shares entitled to vote for
the election of directors.
2.14 Voting for Directors. Unless otherwise provided in the articles of
incorporation, every shareholder entitled to vote for the election of
directors has the right to cast, in person or by proxy, all of the votes to
which the shareholder's shares are entitled for as many persons as there are
directors to be elected and for whom election such shareholder has the right
to vote. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers. Unless the articles of incorporation have dispensed
with or limited the authority of the board of directors by describing who will
perform some or all of the duties of a board of directors, all corporate
powers shall be exercised by or under the authority, and the business and
affairs of the corporation shall be managed under the direction, of the board
of directors.
3.2 Number, Tenure and Qualification of Directions. The authorized
number of directors shall be three (3); provided, however, that if the
corporation has less than three shareholders entitled to vote for the election
of directors, the board of directors may consist of a number of individuals
equal to or greater than the number of those shareholders. The current number
of directors shall be within the limit specified above, as determined (or as
amended form time to time) by a resolution adopted by either the shareholders
or the directors. Each director shall hold office until the next annual
meeting of shareholders or until the director's earlier death, resignation, or
removal. However, if his term expires, he shall continue to serve until his
successor shall have been elected and qualified, or until there is a decrease
in the number of directors. Directors do not need to be residents of Nevada
or shareholders of the corporation.
3.3 Regular Meetings of the Board of Directors. A regular meeting of
the board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of
shareholders, for the purpose of appointing officers and transacting such
other business as may come before the meeting. The board of directors may
provide, by resolution, the time and place for the holding of additional
regular meetings without other notice than such resolution.
3.4 Special Meetings of the Board of Directors. Special meetings of the
board of directors may be called by or at the request of the president or any
director. The person authorized to call special meetings of the board of
directors may fix any place as the place for holding any special meeting of
the board of directors.
3.5 Notice of, and Waiver of Notice for, Special Director Meeting.
Unless the articles of incorporation provide for a longer or shorter period,
notice of the date, time, and place of any special director meeting shall be
given at least two days previously thereto either orally or in writing. Any
director may waive notice of any meeting. Except as provided in the next
sentence, the waiver must be in writing and signed by the director entitled to
the notice. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business and at
the beginning of the meeting (or promptly upon his arrival) objects to holding
the meeting or transacting business at the meeting, and does not thereafter
vote for or assent to action taken at the meeting. Unless required by the
articles of incorporation, neither the business to be transacted at, nor the
purpose of, any special meeting of the board of directors need be specified in
the notice or waiver of notice of such meeting.
3.6 Director Quorum and Voting.
3.6.1 Quorum. A majority of the number of directors prescribed by
resolution shall constitute a quorum for the transaction of business at any
meeting of the board of directors unless the articles of incorporation require
a greater percentage.
Unless the articles of incorporation provide otherwise, any or all
directors may participate in a regular or special meeting by, or conduct the
meeting through the use of, any means of communication by which all directors
participating may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be present in
person at the meeting.
A director who is present at a meeting of the board of directors or
a committee of the board of directors when corporate action is taken is deemed
to have assented to the action taken unless: (1) the director objects at the
beginning of the meeting (or promptly upon his arrival) to holding or
transacting business at the meeting and does not thereafter vote for or assent
to any action taken at the meeting; and (2) the director contemporaneously
requests his dissent or abstention as to any specific action be entered in the
minutes of the meeting; or (3) the director causes written notice of his
dissent or abstention as to any specific action be received by the presiding
officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. The right of dissent or
abstention is not available to a director who votes in favor of the action
taken.
3.7 Director Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if all the directors consent to such action in writing. Action taken
by consent is effective when the last director signs the consent, unless,
prior to such time, any director has revoked a consent by a signed writing
received by the corporation, or unless the consent specifies a different
effective date. A signed consent has the effect of a meeting vote and may be
described as such in any document.
3.8 Resignation of Directors. A director may resign at any time by
giving a written notice of resignation to the corporation. Such resignation
is effective when the notice is received by the corporation, unless the notice
specifies a later effective date.
3.9 Removal of Directors. The shareholders may remove one or more
directors at a meeting called for that purpose if notice has been given that a
purpose of the meeting is such removal. The removal may be with or without
cause unless the articles of incorporation provide that directors may only be
removed with cause. If a director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in
the vote to remove him. A director may be removed only if the number of votes
cast to remove him exceeds the number of votes cast not to remove him.
3.10 Board of Director Vacancies. Unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the
shareholders may fill the vacancy. During such time that the shareholders
fail or are unable to fill such vacancies then and until the shareholders act:
(a) the board of directors may fill the vacancy; or
(b) if the board of directors remaining in office constitute
fewer than a quorum of the board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting group of
shareholders:
(a) if there are one or more directors elected by the same
voting group, only such directors are entitled to vote to fill the vacancy if
it is filled by the directors; and
(b) only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date) may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
3.11 Director Compensation. By resolution of the board of directors,
each director may be paid his expenses, if any, of attendance at each meeting
of the board of directors and may be paid a stated salary as director or a
fixed sum for attendance at each meeting of the board of directors or both.
No such payment shall preclude any director from serving the corporation in
any other capacity and receiving compensation therefor.
3.12 Director Committees.
3.12.1 Creation of Committees. Unless the article sof
incorporation provide otherwise, the board of directors may create one or more
committees and appoint members of the board of directors to serve on them.
Each committee must have one or more members, who shall serve at the pleasure
of the board of directors.
3.12.2 Selection of Members. The creation of a committee and
appointment of members to it must be approved by the greater of (1) a majority
of all the directors in office when the action is taken or (2) the number of
directors required by the articles of incorporation to take such action.
3.12.3 Required Procedures. Those Sections of this Article 3 which
govern meetings, actions without meetings, notice and waiver of notice, quorum
and voting requirements of the board of directors, apply to committees and
their members.
3.12.4 Authority. Unless limited by the article sof incorporation,
each committee may exercise those aspects of the authority of the board of
directors which the board of directors confers upon such committee in the
resolution creating the committee. Provided, however, a committee may not:
(a) authorize distributions;
(b) approve or propose to shareholders action that the
Statutes require be approved by shareholders;
(c) fill vacancies on the board of directors or on any of its
committees;
(d) amend the articles of incorporation pursuant to the
authority of directors to do so;
(e) adopt, amend or repeal bylaws;
(f) approve a plan of merger not requiring shareholder
approval;
(g) authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the board of directors; or
(h) authorize or approve the issuance or sale or contract for
sale of shares or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the board of
directors may authorize a committee (or an officer) to do so within limits
specifically prescribed by the board of directors.
ARTICLE 4. OFFICERS
4.1 Number of Officers. The officers of the corporation shall be a
president, a secretary and a treasurer, each of whom shall be appointed by the
board of directors. Such other officers and assistant officers as may be
deemed necessary, including any vice presidents, may also be appointed by the
board of directors. If specifically authorized by the board of directors, an
officer may appoint one or more officers or assistant officers. The same
individual may simultaneously hold more than one office in the corporation.
4.2 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. If no term is specified, they shall hold office until the
first meeting of the directors held after the next annual meeting of
shareholders. If the appointment of officers shall not be made at such
meeting, such appointment shall be made as soon thereafter as is convenient.
Each officer shall hold office until his successor shall have been duly
appointed and shall have qualified until his death, or until he shall resign
or is removed.
The designation of a specified term does not grant to the officer any
contract rights, and the board may remove the officer at any time prior to the
termination of such term.
4.3 Removal of Officers. Any officer or agent may be removed by the
board of directors at any time, with or without cause. Such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Appointment of an officer or agent shall not of itself create contract rights.
4.4 Resignation of Officers. Any officer may resign at any time,
subject to any rights or obligations under any existing contracts between the
officers and the corporation, by giving notice to the president or board of
directors. An officer's resignation shall take effect at the time specified
therein, and the acceptance of such resignation shall not be necessary to make
it effective.
4.5 President. Unless the board of directors has designated the
chairman of the board as chief executive officer, the president shall be the
chief executive officer of the corporation and, subject to the control of the
board of directors, shall in general supervise and control all of the business
and affairs of the corporation. Unless there is a chairman of the board, the
president shall, when present, preside at all meetings of the shareholders and
of the board of directors. The president may sign, with the secretary or any
other proper officer of the corporation thereunder authorized by the board of
directors, certificates for shares of the corporation and deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board f directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the board of directors from time to time.
4.6 Vice Presidents. If appointed, in the absence of the president or
in the event of his death, inability or refusal to act, the vice president (or
in the event there be more than one vice president, the vice presidents in the
order designate at the time of their election, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
of the president, and when so acting, shall have all the powers of, and be
subject to, all the restrictions upon the president.
4.7 Secretary. The secretary shall: (a) keep the minutes of the
proceedings of the shareholders, the board of directors, and any committees of
the board in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (c) be custodian of the corporate records; (d) when requested
or required, authenticate any records of the corporation; (e) keep a register
of the post office address of each shareholder which shall be furnished to the
secretary by such shareholder; (f) sign with the president, or a vice
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (g) have
general charge of the stock transfer books of the corporation; and (h) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned by the president or by the board
of directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to the supervision of the secretary.
4.8 Treasurer. The treasurer shall: (a) have charge and custody of and
be responsible for all funds and securities of the corporation; (b) receive
and give receipts for monies due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the corporation
in such bank, trust companies, or other depositaries as shall be selected by
the board of directors; and (c) in general perform all of the duties incident
to the office of treasurer and such other duties as from time to time may be
assigned by the president or by the board of directors. If required by the
board of directors, the treasurer shall give a bond for the faithful discharge
of his or her duties in such sum and with such surety or sureties as the board
of directors shall determine. Assistant treasurers, if any, shall have the
same powers and duties, subject to the supervision of the treasurer.
4.9 Salaries. The salaries of the officers shall be fixed from time to
time by the board of directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS, AND EMPLOYEES
5.1 Indemnification of Directors. Unless otherwise provided in the
articles of incorporation, the corporation shall indemnify any individual made
a party to a proceeding because the individual is or was a director of the
corporation, against liability incurred in the proceeding, but only if such
indemnification is both (i) determined permissible and (ii) authorized, as
such are defined in subsection (a) of this Section 5.1.
5.1.1 Determination of Authorization. The corporation shall not
indemnify a director under this Section unless:
(a) a determination has been made in accordance with the
procedures set forth in the Statutes that the director met the standard of
conduct set forth in subsection (b) below, and
(b) payment has been authorized in accordance with the
procedures set forth in the Statutes based on a conclusion that the expenses
are reasonable, the corporation has the financial ability to make the payment,
and the financial resources of the corporation should be devoted to this use
rather than some other use by the corporation.
5.1.2 Standard of Conduct. The individual shall demonstrate that:
(a) he or she conducted himself in good faith; and
(b) he or she reasonably believed:
(i) in the case of conduct in his official capacity with
the corporation, that his conduct was in its best interests;
(ii) in all other cases, that his conduct was at least
not opposed to its best interests; and
(iii) in the case of any criminal proceeding, he or she
had no reasonable cause to believe his conduct was unlawful.
5.1.3 Indemnification in Derivative Actions Limited.
Indemnification permitted under this Section in connection with a proceeding
by or in the right of the corporation is limited to reasonable expenses
incurred in connection with the proceeding.
5.1.4 Limitation on Indemnification. The corporation shall not
indemnify a director under this Section of Article 5:
(a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) in connection with any other proceeding charging improper
personal benefit to the director, whether or not involving action in his or
her official capacity, in which he or she was adjudged liable on the basis
that personal benefit was improperly received by the director.
5.2 Advance of Expenses for Directors. If a determination is made
following the procedures of the Statutes, that the director has met the
following requirements, and if an authorization of payment is made following
the procedures and standards set forth in the Statutes, then unless otherwise
provided in the articles of incorporation, the corporation shall pay for or
reimburse the reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding, if:
(a) the director furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of conduct
described in this section;
(b) the director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the advance if it
is ultimately determined that he did not meet the standard of conduct;
(c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this Section
or the Statutes.
5.3 Indemnification of Officers, Agents and Employees Who Are Not
Directors. Unless otherwise provided in the articles of incorporation, the
board of directors may indemnify and advance expenses to any officer,
employee, or agent of the corporation, who is not a director of the
corporation, to the same extent as to a director, or to any greater extent
consistent with public policy, as determined by the general or specific
actions of the board of directors.
5.4 Insurance. By action of the board of directors, notwithstanding any
interest of the directors in such action, the corporation may purchase and
maintain insurance on behalf of a person who is or was a director, officer,
employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary, or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Statutes.
ARTICLE 6. STOCK
6.1 Issuance of Shares. The issuance or sale by the corporation of any
shares of its authorized capital stock of any class, including treasury
shares, shall be made only upon authorization by the board of directors,
unless otherwise provided by statute. The board of directors may authorize
the issuance of shares for consideration consisting of any tangible or
intangible property or benefit to the corporation, including cash, promissory
notes, services performed, contracts or arrangements for services to be
performed, or other securities of the corporation. Shares shall be issued for
such consideration expressed in dollars as shall be fixed from time to time by
the board of directors.
6.2 Certificates for Shares.
6.2.1 Content. Certificates representing shares of the corporation
shall at minimum, state on their face the name of the issuing corporation and
that it is formed under the laws of the State of Nevada; the name of the
person to whom issued; and the number and class of shares and the designation
of the series, if any, the certificate represents; and be in such form as
determined by the board of directors. Such certificates shall be signed
(either manually or by facsimile) by the president or a vice president and by
the secretary or an assistant secretary and may be sealed with a corporate
seal or a facsimile thereof. Each certificate for shares shall be
consecutively numbered or otherwise identified.
6.2.2 Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations
applicable to each class and the variations in rights, preferences and
limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the
shareholder this information on request in writing and without charge.
6.2.3 Shareholder List. The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the corporation.
6.2.4 Transferring Shares. All certificates surrendered to the
corporation for transfer shall be canceled and no new certificate shall be
issued until the former certificate for a like number of shares shall have
been surrendered and canceled, except that in cash of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates.
6.3.1 Issuing Shares Without Certificates. Unless the articles of
incorporation provide otherwise, the board of directors may authorize the
issue of some or all the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
6.3.2 Information Statement Required. Within a reasonable time
after the issue or transfer of shares without certificates, the corporation
shall send the shareholder a written statement containing, at a minimum, the
information required by the Statutes.
6.4 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a
nominee is to be recognized by the corporation as the owner, the person in
whose name shares stand in the books of the corporation shall be deemed by the
corporation to be the owner thereof for all purposes.
6.5 Restrictions on Transfer or Registration of Shares. The board of
directors or shareholders may impose restrictions on the transfer or
registration of transfer of shares (including any security convertible into,
or carrying a right to subscribe for or acquire shares). A restriction does
not affect shares issued before the restriction was adopted unless the holders
of the shares are parties to the restriction agreement or voted in favor of or
otherwise consented to the restriction.
A restriction on the transfer or registration of transfer of shares may
be authorized:
(a) to maintain the corporation's status when it is dependent
on the number or identity of its shareholders;
(b) to preserve entitlements, benefits or exemptions under
federal or local laws; and
(c) for any other reasonable purpose.
A restriction on the transfer or registration of transfer of shares may:
(a) obligate the shareholder first to offer the corporation or
other persons (separately, consecutively or simultaneously) an opportunity to
acquire the restricted shares;
(b) obligate the corporation or other persons (separately,
consecutively or simultaneously) to acquire the restricted shares;
(c) require as a condition to such transfer or registration,
that any one or more persons, including the holders of any of its shares,
approve the transfer or registration if the requirement is not manifestly
unreasonable; or
(d) prohibit the transfer or the registration of transfer of
the restricted shares to designated persons or classes of persons, if the
prohibition is not manifestly unreasonable.
A restriction on the transfer or registration of transfer of shares is
valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this Section and its existence is noted
conspicuously on the front or back of the certificate or is contained in the
information statement required by this Article 6 with regard to shares issued
without certificates. Unless so noted, a restriction is not enforceable
against a person without knowledge of the restriction.
6.6 Corporation's Acquisition of Shares. The corporation may acquire
its own shares and the shares so acquired constitute authorized but unissued
shares.
If the articles of incorporation prohibit the reissue of acquired shares,
the number of authorized shares is reduced by the number of shares acquired,
effective upon amendment of the articles of incorporation, which amendment may
be adopted by the shareholders or the board of directors without shareholder
action. The articles of amendment must be delivered to the Secretary of State
and must set forth:
(a) the name of the corporation;
(b) the reduction in the number of authorized shares, itemized
by class and series;
(c) the total number of authorized shares, itemized by class
and series, remaining after reduction of the shares; and
(d) a statement that the amendment was adopted by the board of
directors without shareholder action and that shareholder action was not
required.
ARTICLE 7. DISTRIBUTIONS
7.1 Distributions to Shareholders. The board of directors may
authorize, and the corporation may make, distributions to the shareholders of
the corporation subject to any restriction sin the corporation's articles of
incorporation and in the Statutes.
7.2 Unclaimed Distributions. If the corporation has mailed three
successive distributions to a shareholder at the shareholder's address as
shown on the corporation's current record of shareholders and the
distributions have been returned as undeliverable, no further attempt to
deliver distributions to the shareholder need be made until another address
for the shareholder is made known to the corporation, at which time all
distributions accumulated by reason of this Section, except as otherwise
provided by law, be mailed to the shareholder at such other address.
ARTICLE 8. MISCELLANEOUS
8.1 Inspection of Records by Shareholders and Directors. A shareholder
or director of a corporation is entitled to inspect and copy, during regular
business hours at the corporation's principal office, any of the records of
the corporation required to be maintained by the corporation under the
Statutes, if such person gives the corporation written notice of the demand at
least five business days before the date on which such a person wishes to
inspect and copy. The scope of such inspection right shall be as provided
under the Statutes.
8.2 Corporate Seal. The board of directors may provide a corporate seal
which may be circular in form and have inscribed thereon any designation
including the name of the corporation, the state of incorporation, and the
words "Corporate Seal."
8.3 Amendments. The corporation's board of directors may amend or
repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Statutes reserve this
power exclusively to the shareholders in whole or part; or
(b) the shareholders in adopting, amending, or repealing a
particular bylaw provide expressly that the board of directors may not amend
or repeal that bylaw; or
(c) the bylaw either establishes, amends, or deletes, a
greater shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote
and voting groups required to take action under the quorum and voting
requirements then in effect or proposed to be adopted, whichever are greater.
8.4 Fiscal Year. The fiscal year of the corporation shall be
established by the board of directors.
DATED this 16th day of July, 1997.
WINNERS INTERNET NETWORK, INC.
DIRECTORS, OFFICERS AND EMPLOYEES' STOCK OPTION PLAN - 1999
SECTION 1 - PURPOSE OF THE PLAN
1.1 The purpose of this Stock Option Plan (the "Plan") is to provide
Directors, Officers and key full-time employees of Winners Internet Network,
Inc. (the "Corporation") with a proprietary interest through the granting of
options to purchase Common Shares of the Corporation, subject to certain
conditions as hereinafter set forth, for the following purposes:
1.1.1 to increase the interest in the Corporation's welfare of those
Directors, Officers and key full-time employees who share primary
responsibility for the management, growth, development and protection of the
business of the Corporation;
1.1.2 to furnish an incentive to such Directors, Officers and key employees
to continue their services for the Corporation; and
1.1.3 to provide a means through which the Corporation may attract Directors,
Officers and able persons to enter it employment.
SECTION II - ADMINISTRATION OF THE PLAN
2.1 The Board of Directors of the Corporation may, from time to time, adopt,
amend, subject to the prior approval of any regulatory agency having
jurisdiction, and rescind rules and regulations for carrying out the
provisions and purposes of the Plan. The interpretation, construction and
application of the Plan and any provisions thereof made by the Board of
Directors of the Corporation shall be final and conclusive. No Director shall
be liable for any action taken or for any or for any determination made in
good faith in the administration, interpretation, construction or application
of the Plan.
SECTION III - GRANTING OF OPTIONS
3.1 The Board of Directors of the Corporation may from time to time by
Resolution designate Directors, Officers and to key employees of the
Corporation to whom options to purchase Common Shares of the corporation (the
"Shares") may be granted and the number of such shares to be optioned under
this Plan shall not exceed the number provided for in Section IV hereof.
3.2 Options may only be granted by the Corporation pursuant to Resolutions of
the board of Directors.
3.3 Any option granted under this Plan shall be subject to the requirement
that, if at any time counsel to the Corporation shall determine that the
listing, registration or qualification of the Shares subject to such option
upon a stock exchange or under any law or regulation of any jurisdiction, or
the consent or approval of any securities commission, stock exchange or any
governmental or regulatory authority or body, is necessary as a condition of,
or in connection with, the grant or exercise of such option or the issuance or
purchase of Shares hereunder, such option may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to the
Board of Directors. Nothing herein shall be deemed to require the Corporation
to apply for or to obtain such listing, registration, qualification, consent
or approval.
SECTION IV - SHARES SUBJECT TO THE PLAN
4.1 The aggregate number of Shares reserved for issuance under this Plan or
any other share option plan, option for services or employee share purchase
plan of the Corporation shall not exceed 10% of the number of common shares
issued and outstanding of the Corporation at any one time, provided that the
aggregate number of common shares reserved for issuance to any one person
shall not exceed five per cent (5%) of the Corporation's outstanding common
shares (on a non-diluted basis).
SECTION V - OPTION PRICE
5.1 The exercise price shall in all circumstances be set within the
discretion of the Board of Directors, according to applicable rules of
relative regulatory bodies.
SECTION VI - CONDITIONS GOVERNING OPTIONS
6.1 Each option shall be subject to the following conditions:
6.1.1 Employment: Options may be granted under the Plan only to Directors,
Officers and persons in full-time employment by the Corporation. The granting
of an option to a key employee shall not impose upon the Corporation any
obligation to retain the optionee in its employ.
6.1.2 Option Term: The period during which an option is exercisable shall be
determined by the Board of Directors in its sole discretion but shall not,
subject to the provisions of this Plan, exceed five years from the date the
option is granted.
6.1.3 Vesting of Right to Exercise Options: Prior to its expiration or
earlier termination in accordance with this Plan, each option shall be
exercisable as to all or such part or parts of the optioned shares at any time
or from time to time until the date of expiry. Any options not exercised by
the end of the term during which the option is exercisable shall, subject to
paragraph 6.1.5, immediately lapse and become null and void.
6.1.4. Non-Assignability of Option Rights: Each option granted hereunder is
personal to the optionee and shall not be assignable or transferable by the
optionee, whether voluntary or by operation of law, except by will or by the
laws of succession of the domicile of the deceased optionee. No option
granted hereunder shall be pledged, hypothecated, charged, transferred,
assigned or otherwise encumbered or disposed of on pain of nullity.
6.1.5. Effect of Termination of Employment or Death:
6.1.5.1 Should an optionee at any time cease to be a full-time employee or
Director of the Corporation, as the case may be, any option not actually
exercised prior to the date of termination shall, subject to paragraph 6.1.5.2
lapse one hundred eighty days (180) after termination and become null and
void.
6.1.5.2 If an optionee dies, any option or unexercised part thereof granted
to such optionee may be exercised, in accordance with the terms hereof, by the
person to whom the option is transferred by will or the laws of succession.
Such option shall only be exercisable within one year after the optionee's
death or prior to the expiration of the term of the option, whichever occurs
earlier.
6.1.6 Rights as a Shareholder: The optionee (or his/her personal
representatives or legatees) shall have no rights whatsoever as a shareholder
in respect of any shares covered by his/her option until the date of issuance
of a share certificate to him/her (or his/her personal representatives or
legatees) giving notice in writing to the Corporation at its registered
office, addressed to its Chairman or President, which notice shall specify the
number of Shares in respect of which the option is being exercised and shall
be accompanied by full payment, by cash or certified check, of the purchase
price of the number of shares specified. Upon such exercise of the option,
the Corporation shall forthwith cause the transfer agent and registrar of the
Shares of the Corporation to deliver to the optionee (or his/her personal
representative or legatees) a certificate in the name of the optionee
representing in the aggregate such number of shares as the optionee (or
his/her personal representatives or legatees) shall have then paid for and as
are specified in such written notice of exercise option. If required by the
Board of Directors by notification to the optionee, it shall be a condition of
such exercise that the optionee shall represent that he/she is purchasing the
Shares in respect to which the option is bing exercised for investment only
and not with a view to resale or distribution.
SECTION VII - ADJUSTMENT TO SHARES SUBJECT TO THE OPTION
7.1 In the event of any subdivision or re-division of the Shares into a great
number of Shares at any time after the grant of an option to any optionee and
prior to the expiration of the term of such option, the Corporation shall
deliver to such optionee at the time of any subsequent exercise of his/her
option in accordance with the terms hereof in lieu of the number of Shares to
which he/she was theretofore entitled upon such exercise, but for the same
aggregate consideration payable therefor, such number of shares as such
optionee would have held as a result of such subdivision or re-division if on
the record date thereof the optionee had been the registered holder of the
number of Shares to which he/she was theretofore entitled upon such exercise.
7.2 In the event of any consolidation of the Shares into a lesser number of
Shares at any time after the grant of an option to any optionee and prior to
the expiration of the term of such option, the Corporation shall deliver to
such optionee at the time of any subsequent exercise of his/her option in
accordance with the terms hereof in lieu of the number of Shares to which
he/she was theretofore entitled upon such exercise, but for the same aggregate
consideration payable therefor, such number of Shares as such optionee would
have held as a result of such consideration if on the record date thereof the
optionee had been the registered holder of the number of Shares to which
he/she was theretofore entitled upon such exercise.
7.3 If at any time the grant of an option to any optionee and prior to the
expiration of the term of such option, the Shares shall be reclassified,
reorganized or otherwise changed, otherwise than as specified in paragraphs
7.1 and 7.2 or, subject to the provision of paragraph 8.2.1 hereof, the
Corporation shall consolidate, merge or amalgamate with or into another
corporation (the corporation resulting or continuing from such consolidation,
merger or amalgamation being herein called the "Successor Corporation"), the
optionee shall be entitled to receive upon the subsequent exercise of his
option in accordance with the terms hereof and shall accept in lien of the
number of Shares then subscribed for but for the same aggregate consideration
payable therefor, the aggregate number of shares of the appropriate class
and/or other securities of the Corporation (as the case may be) that the
optionee would have been entitled to receive as a result of such
reclassification, reorganization or other change of shares or, subject to the
provisions of paragraph 8.2.1 hereof, as a result of such consolidation,
merger or amalgamation, if on the record date of such reclassification,
reorganization or other change of shares or the effective date of such
consolidation, merger or amalgamation, as the case may be, he/she had been the
registered holder of the number of Shares to which he/she was immediately
therefore entitled upon such exercise.
SECTION VIII - AMENDMENT OR DISCONTINUANCE OF THE PLAN
8.1 The Board of Directors may amend, subject to the prior approval of the
Exchange, or discontinue this Plan at any time, provided, however, that no
such amendment may materially and adversely affect any option rights
previously granted to an optionee under this Plan without the consent of the
optionee, except to the extent required by law.
8.2 Notwithstanding anything contained to the contrary in this Plan or in any
Resolution of the Board of the Board of Directors in implementation thereof:
8.2.1 in the event the Corporation proposes to amalgamate, merge or
consolidate with or into any other corporation (other than with a wholly owned
subsidiary of the Corporation) or to liquidate, dissolve or windup, or in the
event an offer to purchase the Shares of the Corporation or any part thereof
shall be made to all holders of Shares of the Corporation, the Corporation
shall have the right, upon written notice thereof to each optionee holding
options under this Plan to permit the exercise of all such options within the
20 day period next following the date of such notice and to determine that
upon the expiration of such 20 day period, all rights of optionees to such
options or to exercise same (to the extent not thertofore exercised) shall
ipso facto terminate and cease to have further force or effect whatsoever;
8.2.2 the Board of Directors may, by Resolution, subject to applicable
regulatory requirements, advance the date on which any option may be exercised
in the manner to be set forth in such Resolution. The Board of Directors
shall not, in the event of any such advancement, be under any obligation to
advance the date on or by which any option may be exercised by any other
optionee; and
8.2.3 the Board of Directors may, by Resolution, but subject to applicable
regulatory requirements, decide that any of the provisions hereof concerning
the effect of termination for cause of the optionee's employment shall not
apply for any reason acceptable to the Board of Directors.
SECTION IX - EFFECTIVE DATE OF PLAN
9.1 This Plan was adopted by the Board and shall have effect as of and from
the 1st day of January, 1999.
WINNERS INTERNET NETWORK, INC.
By order of the Board of Directors:
/s/ David C. Skinner, Jr.
- -----------------------------
David C. Skinner, Jr.
/s/ Kimberly A. Stein
- --------------------------
Kimberly A. Stein
Date: June 23, 1999
LEASE AGREEMENT
THIS LEASE is made between CHARLES FAZIO, SR., hereafter called "Lessor,"
whose address for purposes of notice under this lease in 1540 Chagrin Road,
Gates Mills, Ohio 44040 and Winner Internet Network, Inc., hereinafter called
"Lessee," whose address for purposes of notice under this lease is 10
Saragossa Street, St. Augustine, Florida 32084.
The parties agree as follows:
1. AGREEMENT TO LEASE: DESCRIPTION OF THE PROPERTY. The Lessor leases to the
Lessees, and the Lessee rents from the Lessor, the improved commercial real
property located at 145 Oviedo Street, St. Augustine, Florida 32084.
2. TERM OF LEASE. The term of this lease shall begin at 12:01 a.m. on 4/13,
1999 and end at 12:00 midnight on 3/30, 2001 on the last day of the three
years.
3. RENTAL. Lessee agrees to pay Lessor as rent the sum of $1,683.00 per
month during the three year rental term, at the address set forth above, or at
any other address the Lessor may designate to the Lessee in writing, plus
applicable Sales Tax, all paid in lawful money of the United States of
America.
Said rent shall be due in advance on the same date of each month during the
term of the Lease, that date being described above as the first date of the
Lease Term. Said rent shall be five percent of the total amount of the rent
due shall be added for payments made after the 5th day of the month. In the
event the check used to pay the monthly rent is returned for insufficient
funds, a five percent charge shall be due as a returned check fee. A
security deposit in the amount of $1,000.00 shall be payable no later than
the date of the execution of this Lease Agreement and shall be maintained by
the Lessor or his agent in a non-interest bearing account.
4. TAXES. Lessor shall be responsible for the payment of all municipal,
county, and/or state ad valorem taxes assessed during the term of this lease
on the leased real property. Lessee shall pay any taxes levied against the
personal property of the Lessee in and about the premises.
5. SUBORDINATION. This Lease and all rights of Lessee under it are and shall
be subject to and subordinate to the rights of any mortgage holder now or
hereafter having a security interest in the Leased Premises or any other
encumbrances Lessor desires to place on the property.
6. LESSEE'S COVENANTS. Lessee further covenants and agrees as follows:
a. To pay the rent and every installment of it when it comes due; to commit
or permit no waste or damages to the premises; to conduct or permit no
business or act that is a nuisance or may be in violation of any federal,
state, or local law or ordinance; to surrender the premises on expiration or
termination of this lease in clean condition and good repair, normal wear and
tear excepted, provided, however, that all alterations, additions, and
improvements permanently attached and made by Lessee shall become and remain
the property of Lessor on the termination of Lessee's occupancy of the
premises.
b. To use the premises in a careful and proper manner as a professional
office. The operation of the premises shall be in accordance with all
ordinances, laws, rules and regulations established by each government entity
having jurisdiction over the use and/or operation of the premises.
c. To pay all costs of fuel, electricity and telephone, utilities used on the
premises. The accounts for all such utilities shall be held in the name of
the Lessee.
d. To maintain at all times during the lease term, at Lessee's cost, a
comprehensive public liability insurance policy protecting Lessor against all
claims or demands that may arise or be claimed on account of Lessee's use of
the premises, in an amount of at least Florida State Minimum for injuries to
persons in one accident. Florida State Minimum for injuries to any one
person, and Florida State Minimum for damages to property. The insurance
shall be written by a company or companies acceptable to Lessor, authorized to
engage in the business of general liability insurance in the State of Florida.
Lessee shall deliver to Lessor annual certificate demonstrating that insurance
is paid up and copies of the insurance policies issued by the insurance
companies. At its option, Lessor may request Lessee to obtain a certified
statement by each insurance carrier containing a clause providing that the
insurance carrier will give Lessor thirty (30) days written notice before any
cancellation shall be effective. The insurance policies shall be provided by
Lessee and shall be for a period of at least one year. If Lessee fails to
furnish policies or certificates showing policies to be paid in full as
provided in this lease. Lessor may obtain the insurance, and the premiums on
that insurance will be deemed additional rental to be paid by Lessee to Lessor
on demand.
e. To indemnify and hold harmless Lessor and the leased premises from all
costs, losses, damages, liabilities, expenses, penalties, and fines whatsoever
that may arise from or be claimed against Lessor or the leased premises by any
person or persons for any injury to person or property or property or damage
of whatever kind or character arising from: the use or occupancy of the leased
premises by Lessee; from any neglect or fault of Lessee or the agents and the
employee of Lessee to comply and conform with all laws, statutes, ordinances,
rules and regulations or any governmental body or subdivision now or hereafter
in force. If any lawsuit or proceeding shall be brought against Lessor or the
leased premises on account of any alleged violations or failure to comply and
conform or on account of any damage, omission, neglect, or use of the premises
by Lessee, the agents and employees of Lessee, or any other person on the
premises, Lessee agrees that Lessee or any other person on the premises will
defend it, pay whatever judgments may be recovered against Lessor or against
the premises on account of it, and pay for all attorneys' fees in connection
with it, including attorneys, fees on appeal.
f. To make no alterations in or additions or improvements to; install any
equipment in, or maintain signs advertising its business on the premises
without, in each case, obtaining the written consent of Lessor which shall not
be unreasonably withheld. Lessee agrees that Lessee will hold Lessor harmless
against all expenses, liens, claims, and damages to either property or person
that may or might arise because any repairs, alterations, additions, or
improvements are made.
7. LESSOR'S COVENANTS. Lessor covenants and agrees as follows:
a. To warrant and defend Lessee in the enjoyment and peaceful possession of
the premises during the aforesaid term, and to execute such documents as are
necessary to authorize Lessee to apply for and obtain those permits necessary
to operate the premises for the use specified herein.
b. To pay the costs of water and sewer service, lawn maintenance and pest
control.
8. DEFAULT IN PAYMENT OF RENT. If any rent required by this Lease is not
paid when due, Lessor will have the option to:
a. Terminate this lease, resume possession of the property, and recover
immediately from Lessee the difference between the rent specified in the Lease
and the fair rental value of the property for the remainder of the term,
reduced to present worth; or
b. Resume possession and release or rent the property for the remainder of
the term for the account of Lessee and recover from Lessee at the end of the
term or at the time each payment of rent comes due under this lease, whichever
Lessor may choose, the difference between the rent specified in the lease and
the rent received on the releasing or renting.
c. Upon termination Lessee shall promptly remove any personal property placed
upon the premises and leave the premises in a good and clean condition.
9. DEFAULTS OTHER THAN RENT. If either Lessor or Lessee fails to perform or
breaches any agreement on this Lease other than the agreement of Leases to pay
rent, and this failure or breach continues for ten days after a written notice
specifying the required performance has been given to the party failing to
perform, (a) the party giving notice may institute action in a court of
competent jurisdiction to terminate this lease or to complete performance of
the agreement; and the losing party in that litigation, including reasonable
attorneys' fees; or (b) Lessor or Lessee may, after 30 days written notice to
the other, comply therewith or correct any such breach, and the costs of that
compliance shall be payable on demand.
10. INSOLVENCY, BANKRUPTCY, ETC. OF LESSEE. If Lessee is declared insolvent
or adjudicated a bankrupt; if Lessee makes an assignment for the benefit of
creditors; if Lessee's leasehold interest is sold under execution or by a
trustee in bankruptcy; or if a receiver is appointed for Lessee. Lessor,
without prejudice to its rights hereunder and at its option, may terminate
this lease and retake possession of the premises immediately and without
notice to Lessee or any assignee, transferee, trustee, or any other person or
persons, using force if necessary.
11. ELECTION BY LESSON NOT EXCLUSIVE. The exercise by Lessor of any right or
remedy to collect rent or enforce its rights under this lease will not be a
waiver or preclude the exercise of any other right or remedy afforded Lessor
by this lease agreement or by statute or law. The failure of Lessor in one or
more instances to insist on strict performance or observations of one or more
instances to insist on strict performance or observations of one or more of
the covenants or conditions of this lease or to exercise any remedy,
privilege, or option conferred by this lease on or reserved to Lessor shall
not operate or be construed as a relinquishment or future waiver of the
covenant or condition or the right enforce it or to exercise that privilege,
option or remedy; that right shall continue in full force and effect. the
receipt by Lessor of rent or any other payment or part of payment required to
be made by the Lessee shall not act to waive any other additional rent or
payment then due. Even with the knowledge of the breach of any covenant or
condition of this lease, receipt will not operate as or be deemed to be a
waiver of this breach, and no waiver by Lessor of any of the provisions of
this lease, or any of Lessor's rights, remedies, privileges, or options under
this lease, will be deemed to have been made unless made by Lessor in writing.
No surrender of the premises for the remainder of the term of this lease will
be valid unless accepted by Lessor in writing. Lessee will not assign nor
sublet this lease without Lessor's prior written consent. No assignment or
sublease will relieve the assignor or sublessor of any obligation under this
lease. Each assignee or sublessee, by assuming such status, will become
obligated to perform every agreement of this lease to be performed by Lessee,
except that a sublessee shall be obligated to perform such agreements only
insofar as they relate to the subleased part of the property and the rent
directly to Lessor only after Sublessor's default in payment and written
demand from Debtor to Sublessee to pay rent directly to Lessor.
12. ADDRESSES FOR PAYMENTS AND NOTICES. Rent payments and notices to Lessor
shall be mailed or delivered to the address set forth on the first page of
this lease, unless Lessor advises Lessee differently in writing.
Notices to Lessee may be mailed or delivered to the leased premises, and proof
of mailing or posting of those notices to the leased premises will be deemed
the equivalent of personal service on Lessee. All notices to either party
shall be sent by certified or registered mail, return receipt requested.
13. CAPTIONS. The captions and paragraphs or letters appearing in this lease
are inserted only as a matter of convenience and in no way define, limit,
construe, or describe the scope or intent of the sections or articles of this
lease or affect this lease in any way.
14. FLORIDA LAW/ATTORNEY'S FEES. This lease will be governed by the laws of
the State of Florida, as to both interpretations and performance. In any
action brought to enforce the terms of this Lease Agreement or upon a breach
for the recovery of the Leased Premises or unpaid rent, the prevailing party
in such action shall be entitled to recover it reasonable attorney's fees and
costs from the non-prevailing party.
15. ENTIRE AGREEMENT. This lease sets forth all the promises, agreements,
conditions, and understandings between Lessor and Lessee relative to the
leased premises. there are no other promises, agreements, conditions, or
understandings, either oral or written, between them. No subsequent
alteration, amendment, change, or addition to this lease will be binding on
Lessor or Lessee unless in writing and signed by them and made a part of this
lease by direct reference.
16. TERMS INCLUSIVE. As used herein, the terms "Lessor" and "Lessee" include
the plural whenever the context requires or admits.
17. ASSIGNMENT. Lessee may not assign this Lease or sublet the premises or
any part thereof, without Lessor's written consent, which consent may be
withheld in Lessor's sole discretion.
18. REPRESENTATIVE BOUND HEREBY. The terms of this lease will be binding on
the respective successors, representatives, and assigns of the parties.
IN WITNESS WHEREOF, Lessor and Lessee have duly executed this Lease Agreement
on the 10th day of April 1998.
Signed, sealed, and delivered in our presence as witnesses:
LESSOR:
<signature of witness appears here> /s/ Charles Fazio
--------------------------
Charles Fazio
LESSEE:
WINNERS INTERNET NETWORK, INC.
/s/ David Skinner, Jr.
---------------------------------------------------
Its President
<Letterhead of Columbia Financial Group appears here
1301 York Road, Suite 400, Lutherville, MD 21093
Tel: (410) 321-1799 Fax: (410) 321-1753, 888-301-6271
www.cfgstocks.com>
CONSULTANT AGREEMENT
Columbia Financial Group is an investor relations, direct marketing,
publishing, public relations ans advertising firm with expertise in the
dissemination of information about publicly traded companies. Also in the
business of providing investor relations services, public relations services,
publishing, advertising services, fulfillment services, as well as internet
related services.
Agreement made this 15th day of December, 1998, between Winners Internet
Network, Inc. (hereinafter referred to as "Corporation"), and Columbia
Financial Group, Inc. (hereinafter referred to as "Consultant"):
Recitals:
The Corporation desires to engage the services of the Consultant to
perform for the Corporation consulting services regarding all phases of the
Corporation's "Public Relations" to include direct investor relations and
broker/dealer relations as such may pertain to the operation of the
Corporation's business.
The Consultant desires to consult with the Board of Directors, the
Officers of the Corporation, and certain administrative staff members of the
Corporation, and to undertake for the Corporation consultation as to the
company's investor relations activities involving corporate relations and
relationships with various broker/dealers involved in the regulated securities
industry.
AGREEMENT
1. The respective duties and obligations of the contracting parties shall
be for a period of fifteen (15) months commencing on the date first appearing
above. This Agreement may be terminated by either parties only in accordance
with the terms and conditions set forth in Paragraph 7.
Services Provided by Consultant
2. Consultant will provide consulting services in connection with the
Corporation's "public relations" dealings with NASD broker/dealer and the
investing public. (At no time shall the Consultant provide services which
would require consultant to be registered and licensed with any federal or
state regulatory body of self-regulating agency.) During the term of this
Agreement, Consultant will provide those services customarily provided by an
investor relations firm to a Corporation, including but not limited to the
following:
(1) Aiding a Corporation in developing a marketing plan directed at
informing the investing public as to the business of the Corporation; and
(2) Providing assistance and expertise in devising an advertising campaign
in conjunction with the marketing campaign as set forth in (a) above; and
(3) Advise the Corporation and provide assistance in dealing with
institutional investors as it pertains to the Company's offerings of its
securities; and
(4) Aid and assist the Corporation in the Corporation's efforts to secure
"market makers" which will trade the Corporation's stock to the public by
providing such information as may be required.
(5) Aid and advise the Corporation in establishing a means of securing
nationwide interst in the Corporation's securities; and
(6) Aid and Assist the Corporation in creating a "web site"; and
(7) Aid and assist the Corporation in creating an "institutional site
program" to provide ongoing and continuos information to fund managers; and
(8) Aid and consult with the Corporation in the preparation and
dissemination of press releases and news announcements; and
(9) Aid and consult with the Corporation in the preparation and
dissemination of all "due diligence" packages requested by and furnished to
NASD registered broker/dealers, the investing public, and/or other
institutional and/or fund managers requesting such information from the
Corporation; and
Compensation
3. In consideration for services provided by Consultant to the Corporation
the Corporation shall pay or cause to be delivered to the Consultant on the
execution of this agreement or as otherwise provided by the following:
A. 500,000 shares of restricted common stock to be issued out of Company's
Treasury.
B. The 400,000 warrants issued to Columbia Financial Group, Inc. under
previous contracts remain unchanged from the format listed below.
The warrants are to be issued with the following exercise prices, and/or
3 year warrants dated from April 1, 1998.
150,000 at .25 share
100,000 at .635 share
100,000 at 1.00 share
50,000 at 1.25 share
Compliance
4. In the event the shares of the Corporation are not presently trading on
any recognized market, the said shares delivered by Corporation to Consultant
will, at that particular time, be "free trading," or, if a registration is
contemplated, the shares shall have "piggy back" registration rights and will,
at the expense of the Corporation, be included in said registration.
Representation of Corporation
5. (a). The Corporation, upon entering this Agreement, hereby warrants and
guarantees to the Consultant that all statements, either written or oral, made
by the Corporation to the Consultant are true and accurate, and contain no
misstatements of a material fact. The Corporation acknowledges that the
information it delivers to the Consultant will be used by the Consultant in
preparing materials regarding the Company's business, including but not
limited to, its financial condition, for dissemination to the public.
Therefore, in accordance with Paragraph 6, below, the Corporation shall hold
harmless the Consultant from any and all error, omissions, misstatements,
except those made in a negligent or intentionally misleading manner in
connection with all information furnished by Corporation to Consultant, in
accordance with and pursuant to the terms and conditions of this
Agreement for whatever purpose or purposes the Consultant sees fit to use said
information. The Corporation further represents and warrants that as to all
matters set forth within this Agreement, the Corporation has had independent
legal counsel to advise the Corporation of all matters concerning, but not
necessarily limited to, corporate law, corporate relations, investor
relations, all matters concerning and in connection with Company's activities
regarding the Securities Act of 1933 and 1934, and state Blue Sky laws.
1. Authorized: _____________________ shares.
2. Issued:__________________________ shares.
3. Outstanding: ____________________ shares.
4. Free trading (float): ___________ shares (approx.)
5. Shares subject to Rule 144 restrictions: ____________ shares (approx.)
Limited Liability
6. With regard to the services to be performed by the Consultant pursuant to
the terms of this Agreement, the Consultant shall not be liable to the
corporation, or to anyone who may claim any right due to any relationship with
the Corporation, or any acts or omissions in the performance of services on
the part of the Consultant, or on the part of the agents or employees of the
Consultant, except when said acts or omissions of the Consultant are due to
its willful misconduct or culpable negligence.
Termination
7. This Agreement may be terminated by either party upon the giving of not
less than sixty (60) days written notice, delivered to the parties at such
address or addresses as set forth in Paragraph 9, below. In the event this
Agreement is terminated by the Corporation, all compensation paid by
Corporation to the Consultant shall be deemed earned. In the event this
Agreement is terminated by Consultant, a portion of the compensation paid by
Corporation to Consultant shall be "back-charged" to Consultant, and payable
to the Corporation as follows:
(a) In the event the Agreement is terminated by the Consultant in months 1
through 6, Consultant shall repay to Corporation two thirds (2/3rds) of the
fees paid pursuant to Paragraph 3 above.
(b) In the event the Consultant terminates this Agreement during months 7
through 10, the Corporation shall be entitled to a return of fifth percent
(50%) of the fees paid in accordance with Paragraph 3 above; thereafter, all
fees paid shall be deemed earned.
(c) In the event of a termination by either party, any repayment of funds or
stock due from Consultant to Corporation may be paid either in cash or the
equivalent number of shares of the Corporation received by Consultant from the
Corporation in accordance with Paragraph 3 above, payable at the option of the
Consultant. The valuation of said shares for purposes of repayment of shares,
shall be the bid price of said shares are tendered back to the Corporation.
If there is no bid price, then the price shall be agreed to, by separate
writing to be determined by the parties upon the execution of this Agreement.
Notices
8. Notices to be sent pursuant to the terms and conditions of this Agreement,
shall be sent as follows:
Attorneys' Fees
In the event any litigation or controversy, including arbitration, arises
out of or in connection with this Agreement between parties hereto, the
prevailing party in such litigation, arbitration or controversy, shall be
entitled to recover from the other parties, all reasonable attorney's fees,
expenses and suit costs, including those associated within the appellate or
post judgement collection proceedings.
Arbitration
10. In connection with any controversy or claim arising out of or relating to
this Agreement, the parties hereto agree that such controversy shall be
submitted to arbitration, in conformity with the Federal Arbitration Act
(Section 9 U.S. Code Section 901 et seq), and shall be conducted in accordance
with the Rules of the American Arbitration Association. Any judgment rendered
as a result of the arbitration of any dispute herein, shall upon being
rendered by the arbitrators be submitted to a Court of competent jurisdiction
within the State of Florida or in any state where a party to this action
maintains its principal business or is a Corporation incorporated in said
state.
Governing Law
11. This Agreement shall be construed under and in accordance with the laws
of the State of New Jersey, and all parties hereby consent to New Jersey as
the proper jurisdiction for said proceedings provided herein.
Parties Bound
12. This Agreement shall be binding on and inure to the benefit of the
contracting parties and their respective heirs, executors, administrations,
legal representatives, successors, and assigns when permitted by this
Agreement.
Legal Construction
13. In case any one or more of the provisions contained in this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, the invalidity, illegality, or unenforceability shall not affect any
other provision, and this Agreement shall be construed as if the invalid,
illegal, or unenforceable provision had never been contained in it.
Prior Agreements Superseded
14. This Agreement constitutes the sole and only Agreement of the contracting
parties and supersedes any prior understandings or written or oral agreements
between the respective parties. Further, this Agreement may only be modified
or changed by written agreement signed by all the parties hereto.
Multiple Copies or Counterparts of Agreement
15. The original and one or more copies of this Agreement may be executed by
one or more of the parties hereto. In such event, all of such executed copies
shall have the same force and effect as the executed original, and all of such
counterparts taken together shall have the effect of a fully executed
original. Further this Agreement may be signed by the parties and copies
hereof delivered to each party by way of facsimile transmission, and such
facsimile copies shall be deemed original copies for all purposes if original
copies of the parties' signatures are not delivered.
Liability of Miscellaneous Expenses
16. The Corporation shall be responsible to any miscellaneous fees and costs
approved in writing prior by the Company or its agents to commitment that are
unrelated to the agreement made between the Parties.
Headings
16. Headings used throughout this Agreement are for reference and
convenience, and in no way define, limit or describe the scope or intent of
this Agreement or effect its provisions.
IN WITNESS WHEREOF, the parties have set their hands and seal as of the
date written above.
BY: /s/ Timothy J. Rieu
-------------------
Timothy J. Rieu, President
Columbia Financial Group
BY: /s/ David Skinner, Jr. President
--------------------
David Skinner Jr., President
Winners Internet Network, Inc.
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this 31st day
of July, 1997, among Winners Internet Network, Inc., a Nevada corporation
("WIN"); The Davki Agency Ltd., Inc., a Delaware corporation, any and all of
its subsidiaries and fictitious names (hereinafter collectively referred to as
"Davki") and its shareholders (hereinafter "Shareholders").
WIN wishes to acquire all the issued and outstanding stock of Davki for
and in exchange for stock of WIN, in a stock for stock transaction intending
to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. The parties intend for this Plan
to represent the terms and conditions of such tax-free reorganization, which
Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
Davki agree to assign, transfer, and deliver to WIN, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of Davki stock, and WIN
agrees to acquire such shares on the date thereof, or as soon as practicable
thereafter, by issuing and delivering in exchange therefore solely common
shares of WIN's stock, par value $0.001, in the aggregate of 8,000,000 shares,
subject to the provisions of this Plan. Subsequent to the date hereof, the
Shareholders shall, upon the surrender of the Davki certificates representing
their respective beneficial and record ownership of all of the issued and
outstanding shares of Davki to WIN, as soon as practicable hereafter, and
further provided an exemption from the registration provisions of Section 5 of
the Securities Act of 1933 is available for the issuance thereof, the
Shareholders shall be entitled to receive a certificate(s) evidencing shares
of the exchanged WIN stock as provided for herein. Upon the consummation of
the transaction contemplated herein, WIN shall be the beneficial and record
owner of all of the issued and outstanding stock of Davki.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of WIN shares to be issued and delivered pursuant to this Plan shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in WIN common stock,
which may occur between the date of the execution of this Plan and the date of
the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to WIN at
the closing provided for in Section 2 (the "Closing") the shares of common
stock of Davki listed opposite their respective names on Exhibit A hereto (the
"Davki shares") in exchange for shares of the common stock of WIN as outlined
above in Section 1.1 hereof (the "WIN Stock"). All of such shares of
<PAGE>
WIN common stock shall be issued at the closing to the Shareholders, in the
numbers shown opposite their respective names in Exhibit "A." The transfer of
Davki shares by the Shareholders shall be effected by the delivery to WIN at
the Closing of certificates representing the transferred shares endorsed in
blank or accompanied by stock powers executed in blank, with all signatures
guaranteed by a national bank and with all necessary transfer taxes and other
revenue stamps affixed and acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as WIN may request in order to more
effectively sell, transfer and assign clear title and ownership in the Davki
shares to WIN.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Daniel W. Jackson, Esq. on July 31, 1997 or at such other
time or place as may be mutually agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier
service, conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives. In any event,
the closing of the transactions contemplated by this Plan shall be effected as
soon as practicable after all of the conditions contained herein have been
satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
Representations, Warranties and Covenants of WIN
WIN represents and warrants to, and covenants with, the Shareholders and
Davki as follows:
3.1 Corporate Status. WIN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. WIN has
full corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business on all material respects as it is now being conducted, and there is
no jurisdiction in which the character and location of the assets owned by it,
or the nature of the business transacted by it, requires qualification.
Included in the WIN schedules (defined below) are complete and correct
-2-
<PAGE>
copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. The execution and delivery of this Plan does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of WIN's Articles of Incorporation or Bylaws. WIN has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of WIN as of the date
hereof consists of 20,000,000 common shares, par value $0.001. The common
shares of WIN issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, or calls or any understanding,
agreements, commitments, contracts or promises with respect to the issuance of
WIN's common stock or with regard to any options, warrants or other
contractual rights to acquire any of WIN's authorized but unissued common
shares.
3.3 Financial Statements.
(a) WIN hereby warrants and covenants to Davki that the audited
financial statements for its year ended December 31, 1996 and December 31,
1995, fairly and accurately represent the financial condition of WIN and that
the same will be prepared along with the period ended as of the date of
Closing, for consolidation by an independent public accountant, which shall be
prepared in accordance with generally accepted accounting principles
consistently applied, on or before the expiration of forty-five days from the
date of Closing.
(b) WIN hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of WIN as submitted heretofore to
Davki for examination and review.
3.4 Subsidiaries. WIN has no subsidiaries.
3.5 Conduct of Business. WIN has not been engaged in any significant
business operations since its inception. WIN will use its best efforts to
maintain and preserve its business organization, employee relationships and
goodwill intact, and will not, without the prior written consent of Davki,
enter into any material commitments except in the ordinary course of business.
3.6 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of WIN, threatened by or against or
effecting WIN at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
WIN does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
3.7 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, WIN and its present management will (i) give to the
Shareholders and Davki, or their duly authorized representatives, full access,
during normal business hours, to all of its books, records, contracts and
other corporate documents and properties so that the Shareholders and Davki,
or their duly authorized representatives, may inspect them; and (ii) furnish
such
-3-
<PAGE>
information concerning the properties and affairs of WIN as the Shareholders
and Davki, or their duly authorized representatives, may reasonably request.
Any such request to inspect WIN's books shall be directed to WIN' counsel,
Daniel W. Jackson, at the address set forth herein under Section 10.4 Notices.
3.8 Confidentiality. Until the Closing (and thereafter if there is no
Closing), WIN and its representatives will keep confidential any information
which they obtain from the Shareholders or from Davki concerning its
properties, assets and the proposed business operations of Davki. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on July 31, 1997 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto, WIN
will return to Davki all written matter with regard to Davki obtained in
connection with the negotiations or consummation of this Plan.
3.9 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which WIN was or is a party, or to which
any of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of WIN.
3.10 Corporate Authority. WIN has full corporate power and authority to
enter into this Plan and to carry out its obligations hereunder and will
deliver to the Shareholders and Davki, or their respective representatives, at
the Closing, a certified copy of resolutions of its Board of Directors
authorizing execution of this Plan by its officers and performance thereunder.
3.11 Consent of Shareholders. WIN hereby warrants and represents that
the Shareholders of WIN, being the owners of a majority of the issued and
outstanding stock of the Corporation consented in writing to the authorization
to execute an Agreement and Plan of Reorganization as between WIN and Davki
pursuant to a stock-for-stock transaction in which WIN would acquire all of
the issued and outstanding shares of Davki in exchange for the issuance of a
total of 8,000,000 common shares of WIN.
3.12 Special Covenants and Representations Regarding the Exchanged WIN
Stock. The consummation of this Plan and the transactions herein contemplated
include the issuance of the exchanged WIN shares to the Shareholders, which
constitutes an offer and sale of securities under the Securities Act of 1933,
as amended, and applicable states' securities laws. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
requirements of such statutes which depend interlace on the circumstances
under which the Shareholders acquire such securities. In connection with the
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, at the Closing, Shareholders shall cause
to be delivered to WIN a Letter(s) of Investment Intent in the form attached
hereto as Exhibit B and incorporated herein by reference.
3.13 Undisclosed or Contingent Liabilities. WIN hereby represents and
warrants that it has no undisclosed or contingent liabilities which have not
been disclosed to Davki.
-4-
<PAGE>
3.14 Information. The information concerning WIN set forth in this
Plan, and the WIN schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Davki in connection with this Plan.
3.15 Title and Related Matters. WIN has good and marketable title to
all of its properties, interests in properties, and assets, real and personal,
which are reflected, or will be reflected, in the WIN balance sheets, free and
clear of any and all liens and encumbrances.
3.16 Contracts or Agreements. WIN is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
Davki.
3.17 Governmental Authorizations. WIN has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by WIN of this Plan and the consummation by
Davki of the transactions contemplated hereby.
3.18 Compliance with Laws and Regulations. WIN has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of WIN or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Davki.
3.19 Approval of Plan. The Board of Directors of WIN has authorized the
execution and delivery of this Plan by WIN and have approved the Plan and the
transactions contemplated hereby. WIN has full power, authority, and legal
right to enter into this Plan and to consummate the transactions contemplated
hereby.
3.20 Investment Intent. WIN is acquiring the Davki shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and WIN has no commitment or present intention
to liquidate Davki or to sell or otherwise dispose of the Davki shares.
3.21 Unregistered Shares and Access to Information. WIN understands
that the offer and sale of the Davki shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning Davki or the Davki shares. WIN has
been provided with and reviewed all information concerning Davki, the Davki
shares as it has considered necessary or appropriate as a prudent and
knowledgeable investor to enable it to make
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an informed investment decision concerning the Davki shares. WIN has made an
investigation as to the merits and risks of its acquisition of the Davki
Shares and has had the opportunity to ask questions of, and has received
satisfactory answers from, the officers and directors of Davki concerning
Davki, the Davki shares and related matters, and has had an opportunity to
obtain additional information necessary to verify the accuracy of such
information and to evaluate the merits and risks of the proposed acquisition
of the Davki shares.
3.22 WIN Schedules. WIN has delivered to Davki the following items
listed below, hereafter referred to as the "WIN Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of WIN on or about the date within the Plan is
executed to certify that the WIN Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Financial statements;
(c) Shareholder list;
(d) Resolution of Directors approving Plan;
(e) Officer's Certificate as required under Section 6.2 of the
Plan;
(f) Opinion of counsel as required under Section 6.4 of the Plan;
(g) Certificate of Good Standing;
(h) Consent of Shareholders approving Plan;
Section 4
Representations, Warranties and Covenants of Davki
Davki represents and warrants to, and covenants with, the Shareholders
and WIN as follows:
4.1 Corporate Status. Davki is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
incorporated on June 16, 1997. Davki has full corporate power and is duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets and to carry on its business on all material respects as
it is now being conducted, and there is no jurisdiction in which the character
and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification. Included in the Davki schedules
(defined below) are complete and correct copies of its Articles of
Incorporation and Bylaws as in effect on the date hereof. The execution and
delivery of this Plan does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of Davki's
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Articles of Incorporation or Bylaws. Davki has taken all action required by
law, its Articles of Incorporation, its Bylaws, or otherwise, to authorize the
execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of Davki as of the
date hereof consists of 1,500 common shares. As of the date hereof all common
shares of Davki issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, or calls or any understanding,
agreements, commitments, contracts or promises with respect to the issuance of
Davki's common stock or with regard to any options, warrants or other
contractual rights to acquire any of Davki's authorized but unissued common
shares.
4.3 Subsidiaries. Davki has no subsidiaries.
4.4 Conduct of Business. Davki will use its best efforts to maintain
and preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of WIN, enter into any
material commitments except in the ordinary course of business.
Davki agrees that Davki will conduct itself in the following manner
pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of Davki.
(b) Capitalization, etc. Davki will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.6 Options, Warrants and Rights. Although Davki intends to enact and
put into effect various management and employee benefit plans in the near
future, as of the date hereof, Davki has no options, warrants or stock
appreciation rights related to the authorized but unissued Davki common stock.
There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued Davki common stock, except
options, warrants, calls, or commitments, if any, to which Davki is not a
party and by which it is not bound.
4.7 Title to Property. Davki has good and marketable title to all of
its properties and assets, real and personal, proprietary or otherwise, as
will be reflected in the balance sheets of Davki, and the properties and
assets of Davki are subject to no mortgage, pledge, lien or encumbrance,
unless as otherwise disclosed in its financial statements.
4.8 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Davki, threatened by or against or
effecting Davki at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Davki does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
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4.9 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Davki and its present management will (i) give to
the Shareholders and Davki, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Davki, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of Davki as the
Shareholders and Davki, or their duly authorized representatives, may
reasonably request. Any such request to inspect Davki's books shall be
directed to Davki's representative, at the address set forth herein under
Section 10.4 Notices.
4.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Davki and its representatives will keep confidential any information
which they obtain from the Shareholders or from Davki concerning its
properties, assets and the proposed business operations of Davki. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on July 31, 1997 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto, Davki
will return to WIN all written matter with regard to WIN obtained in
connection with the negotiations or consummation of this Plan.
4.11 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of WIN to be
delivered to them under this Plan for investment purposes and not with a view
to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to WIN
on the date of Closing or no later than the date on which the restricted
shares are issued and delivered to the Shareholders, their assigns, or
designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.12 Unregistered Shares and Access to Information. Davki and the
Shareholders understand that the offer and sale of WIN shares to be exchanged
for the Davki shares have not been registered with or reviewed by the
securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning WIN or WIN stock. Davki and the
Shareholders have been provided with and reviewed all information concerning
WIN and WIN shares, to be exchanged for the Davki shares as they have
considered necessary or appropriate as prudent and knowledgeable investors to
enable them to make informed investment decisions concerning the WIN shares,
to be exchanged for the Davki shares. Davki and the Shareholders have made an
investigation as to the merits and risks of their acquisition of the WIN
shares, to be exchanged for the Davki shares and have had the opportunity to
ask questions of, and have received satisfactory answers from, the officers
and directors of WIN concerning WIN post-split shares to be exchanged for the
Davki shares and related matters, and have had an opportunity to obtain
additional information necessary to verify the accuracy of such information
and to evaluate the merits and risks of the proposed acquisition of the WIN
shares to be exchanged for the Davki shares.
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4.13 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of Davki of whatever class or series, which the
Shareholders have contracted to exchange.
4.14 Contracts.
(a) Set forth in the Davki Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which Davki is a party or by which Davki or
its properties are bound.
(b) Except as may be set forth in the Davki Schedules, Davki is not
a party to any contract, agreement, corporate restriction, or subject to any
judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of Davki.
(c) Except as set forth in the Davki Schedules, Davki is not a
party to any material oral or written (i) contract for employment of any
officer which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance, or any other
retirement plan of arrangement covered by Title IV of the Employee Retirement
Income Security Act, as amended, or otherwise covered; (iii) agreement
providing for the sale, assignment or transfer of any of its rights, assets or
properties, whether tangible or intangible, except sales of its property in
the ordinary course of business with a value of less than $2,000; or (iv)
waiver of any right of any value which in the aggregate is extraordinary or
material concerning the assets or properties scheduled by Davki, except for
adequate value and pursuant to contract. Davki has not entered into any
material transaction which is not listed in the Davki Schedules or reflected
in the Davki financial statements.
4.15 Material Contract Defaults. Davki is not in default in any
material respect under the terms of any contract, agreement, lease or other
commitment which is material to the business, operations, properties or
assets, or condition of Davki, and there is no event of default or event
which, with notice of lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other
commitment in respect of which Davki has not taken adequate steps to prevent
such default from occurring, or otherwise compromised, reached a satisfaction
of, or provided for extensions of time in which to perform under any one or
more contract obligations, among others.
4.16 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which Davki was or is a party, or to which any of
its assets or operations are subject, and will not conflict with any provision
of the Articles of Incorporation or Bylaws of Davki.
4.17 Governmental Authorizations. Davki has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state
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securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Davki of
this Plan and the consummation by Davki of the transactions contemplated
hereby.
4.18 Compliance with Laws and Regulations. Davki has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of Davki or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to WIN.
4.19 Approval of Plan. The Board of Directors of Davki have authorized
the execution and delivery of this Plan by Davki and have approved the Plan
and the transactions contemplated hereby. Davki has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
4.20 Information. The information concerning Davki set forth in this
Plan, and the Davki Schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to WIN in connection with this Plan.
4.21 Davki Schedules. Davki has delivered to WIN the following items
listed below, hereafter referred to as the "Davki Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of Davki on or about the date within the Plan is
executed to certify that the Davki Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements
(c) Resolution of Board of Directors approving Plan;
(d) Consent of Shareholders approving Plan;
(e) A list of key employees, including current compensation,
with notation as to job description and whether or not such employee is
subject to written contract, and if subject to a contract or employment
agreement, a copy of the same;
(f) A schedule showing the name and location of each bank or
other institution with which Davki has an account and the names of the
authorized persons to draw thereon or having access thereto;
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(g) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(h) Officer's Certificate as required by Section 7.2 of the
Plan;
(i) Certificate of Good Standing.
Section 5
Special Covenants
5.1 Davki Information Incorporated in WIN's Reports. Davki represents
and warrants to WIN that all the information furnished under this Plan shall
be true and correct in all material respects and that there is no omission of
any material fact required to make the information stated not misleading.
Davki agrees to indemnify and hold WIN harmless, including each of its
Directors and Officers, a and each person, if any, who controls such party,
under any applicable law from and against any and all losses, claims, damages,
expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.2 Special Covenants and Representations Regarding the Exchanged WIN
Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the WIN shares in exchange for all of
the issued and outstanding shares of Davki to the Shareholders constitutes the
offer and sale of securities under the Securities Act and the applicable state
statutes, which depend, inter alia, on the circumstances under which the
Shareholders acquire such securities. WIN intends to rely on the exemption of
the registration provision of Section 5 of the Securities Act as provided for
under Section 4.2 of the Securities Act of 1933, which states "transactions
not involving a public offering", among others. Each Shareholder upon
submission of his Davki shares and the receipt of the WIN post-split shares
exchanged therefor, shall execute and deliver to WIN a letter of investment
invent to indicate, among other representations, that the Shareholder is
exchanging the Davki shares for WIN post-split shares for investment purposes
and not with a view to the subsequent distribution thereof. A proposed
Investment Letter is attached hereto as Exhibit B and incorporated herein by
reference for the general use by the Shareholders, as they may determine.
5.3 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) Davki and WIN will (i) perform all of its obligations under
material contracts, leases, insurance policies and/or documents relating to
its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
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fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither Davki nor WIN will (i) make any change in its Articles
of Incorporation or Bylaws except and unless as contemplated pursuant to
Section 3 of this Plan; (ii) enter into or amend any contract, agreement, or
other instrument of the types described in the parties' schedules, except that
a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $5,000.
Section 6
Conditions Precedent to Obligations of
Davki and the Shareholders
All obligations of Davki and the Shareholders under this Plan are subject
to the satisfaction, on or before the Closing date, except as otherwise
provided for herein, or waived or extended in writing by the parties hereto,
of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by WIN in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, WIN shall have performed and complied with by WIN
prior to the Closing, unless waived or extended in writing by the parties
hereto. Davki shall have been furnished with a certificate, signed by a duly
authorized executive officer of WIN and dated the Closing date, to the
foregoing effect.
6.2 Officers' Certificate. Davki and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of WIN, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
WIN, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of WIN.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of WIN, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of WIN, except as
otherwise disclosed to Davki.
6.4 Opinion of Counsel of WIN. WIN shall furnish to Davki and the
Shareholders an opinion dated as of the Closing date and in form and substance
satisfactory to Davki and the Shareholders to the effect that:
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(a) WIN is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of WIN, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of Davki, does not require it to register it to do business as a
foreign corporation on any jurisdiction other than under the jurisdiction of
its Articles of Incorporation or Bylaws and WIN has complied to the best of
its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, and Secretary of State for the State of Nevada, all
statements and reports required to be filed.
(c) The authorized and outstanding capital stock of WIN as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against WIN of any court or before or by any
governmental body which might materially effect the business of WIN or the
financial condition of WIN as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against WIN.
(e) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of WIN, or any
contract, agreement, indenture, mortgage, or order by which WIN is bound.
(f) This Plan constitutes a legal, valid and binding obligation of
WIN enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(g) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of WIN and have been duly authorized by its Board of Directors.
6.5 Good Standing. Davki shall have received a Certificate of Good
Standing from the State of Nevada, dated within ninety (90) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that WIN is in good standing as a corporation in the State
of Nevada.
6.6 Other Items. Davki and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as Davki and the Shareholders may reasonably request.
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Section 7
Conditions Precedent to Obligations of WIN
All obligations of WIN under this Plan are subject, at its option, to the
fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by Davki and the Shareholders under this Plan were true when made and
shall be true as of the Closing date (except for changes therein permitted by
this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, WIN shall have
performed and complied with by Davki prior to the Closing, unless waived or
extended in writing by the parties hereto. WIN shall have been furnished with
a certificate, signed by a duly authorized executive officer of Davki and
dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. WIN shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of Davki, to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of Davki, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Plan, or which might result in any material
adverse change in the assets, properties, business, or operations of Davki.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of WIN, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of Davki, except as
otherwise disclosed to WIN.
7.4 Good Standing. WIN shall have received a Certificate of Good
Standing from the State of Delaware, dated within ninety (90) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Davki is in good standing as a corporation in the State
of Delaware.
7.5 Dissenters' Rights Waived. The Shareholders of Davki, and each of
them, have agreed and hereby waive any dissenters' rights, if any, under the
laws of the State of Delaware in regards to any objection to this Plan as
outlined herein and otherwise consent to and agree and authorize the execution
and consummation of the within Plan in accordance to the terms and conditions
of this Plan by the management of Davki.
7.6 Other Items. WIN shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as WIN may reasonably request.
7.7 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to WIN.
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Section 8
Termination
8.1 Termination by Davki or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of Davki or the
Shareholders, if WIN shall fail to comply in any material respect with any of
the covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by WIN. This Plan may be terminated at any time prior
to the Closing date by action of WIN if Davki shall fail to comply in any
material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of WIN, expressed by action of its Board of Directors,
Davki or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint David C.
Skinner, Jr. as their agent and attorney in fact (the "Shareholders'
Representative") with full power and authority until the Closing to execute,
deliver and receive on their behalf all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan
and to take such other action on their behalf in connection with this Plan,
the Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the
Shareholders under Section 1 hereof or increase the extent of their obligation
to WIN hereunder, unless agreed in writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
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10.2 Payments of Estimated Costs and Fees. WIN and Davki mutually
determine and agree that Davki shall pay the estimated costs and fees incurred
in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, Davki and the Shareholders
shall cause to have promptly prepared and disseminated a news release
concerning the execution and consummation of the Plan, such press release and
communication to be released promptly and within the time required by the
laws, rules and regulations as promulgated by the United States Securities and
Exchange Commission, and concomitant therewith to cause to be prepared a full
and complete letter to WIN's shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to WIN: Winners Internet Network, Inc.
215 South State Street, Suite 1100
Salt Lake City, Utah 84111
With a copy to: Daniel W. Jackson, Esq.
215 South State #1100
Salt Lake City, Utah 84111
If to Davki: The Davki Agency Ltd., Inc.
15 8th Street
St. Augustine, Florida 32084
If to the Shareholders: David C. Skinner, Jr.
10 Saragossa Street
St. Augustine, Florida 32084
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between WIN, Davki
and the Shareholders with respect to the subject matter hereof, all of which
are hereby merged into this Plan, which alone fully and completely expresses
the agreement of the parties relating to the subject matter hereof. Excepting
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the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Davki
and WIN acknowledge, however, that each are being represented by their own tax
advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
-17-
<PAGE>
WINNERS INTERNET NETWORK, INC.
Attest:
/s/ John W. Peters
_____________________ By: _________________________________
Its President
THE DAVKI AGENCY LTD., INC.
Attest:
/s/ David C. Skinner, Jr.
_____________________ By: __________________________________
Its President
SHAREHOLDERS:
Attest:
/s/ David C. Skinner, Jr.
_____________________ By____________________________________
David C. Skinner, Jr.
Attest:
/s/ Kimberly A. Stein
_____________________ By______________________________________
Kimberly A. Stein
Attest:
/s/ Charles E. Scott
_____________________ By______________________________________
Charles E. Scott
Attest:
/s/ Sandra K. Varney
_____________________ By___________________________________
Sandra K. Varney
Attest:
/s/ PHI Mutual Ventures, Inc.
_____________________ By______________________________________
PHI Mutual Ventures, Inc.
-18-
<PAGE>
Attest:
/s/ Harley Investments, Inc.
_____________________ By________________________________
Harley Investments, Inc.
Attest:
/s/ J.V.O. Consulting, Inc.
_____________________ By__________________________________
J.V.O. Consulting, Inc.
Attest:
/s/ Gregory Fox
_____________________ By__________________________________
Gregory Fox
Attest:
/s/ Jason Fox
_____________________ By___________________________________
Jason Fox
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 10-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> OCT-31-1999 DEC-31-1998
<CASH> 693,253 28,857
<SECURITIES> 0 0
<RECEIVABLES> 2,024,869 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,718,122 28,857
<PP&E> 210,092 208,278
<DEPRECIATION> 61,563 61,563
<TOTAL-ASSETS> 2,891,651 204,272
<CURRENT-LIABILITIES> 821,785 13,621
<BONDS> 0 0
0 0
0 0
<COMMON> 15,991 14,791
<OTHER-SE> 2,053,875 175,860
<TOTAL-LIABILITY-AND-EQUITY> 2,891,651 204,272
<SALES> 1,749,878 2,168
<TOTAL-REVENUES> 1,749,878 2,168
<CGS> 0 0
<TOTAL-COSTS> 620,663 842,728
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,129,215 (840,580)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 1,129,215 (840,580)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,129,215 (840,580)
<EPS-BASIC> .07 (.06)
<EPS-DILUTED> .07 (.06)
</TABLE>
