SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-23871
BCS INVESTMENT CORPORATION
(Name of small business issuer in its charter)
COLORADO 84-1434323
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1708 DOLPHIN AVENUE, SUITE 400, KELOWNA, BRITISH COLUMBIA, V1Y 9S4 CANADA
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (250) 717-8966
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK
NO PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to the filing requirements for the past 90 days. Yes _X_ No ___
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.[ ]
Issuer's revenues for its most recent fiscal year. $8,847
Aggregate market value of the voting stock held by
non-affiliates of the registrant as of April 11, 2000: $2,242,267 (See Item 5)
Number of shares outstanding of registrant's Common Stock, no par value,
as of April 11, 2000: 14,046,080 (See Item 11)
Documents incorporated by reference: NONE
Transitional Small Business Disclosure Format (check one): Yes ___ No _X_
Exhibit index on consecutive page 21 Page 1 of 51 Pages
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
The Company was incorporated under the laws of the State of Colorado on
September 19, 1997. From its inception to June 18, 1999, the Company operated as
a "shell" company and its business plan was to seek out and take advantage of
business opportunities that may have the potential for profit, and to acquire
such businesses, or a controlling interest therein.
On June 18, 1999, a change in control of the Company occurred in conjunction
with closing under a Reorganization and Stock Purchase Agreement between the
Company and Workfire.com, a Nevada corporation ("Workfire-Nevada"). As the
result of the Reorganization and Stock Purchase Agreement, the Company acquired
89.00% of the issued and outstanding shares of Workfire-Nevada.
Prior to closing, the Company adopted the assumed name of Workfire.com, Inc. At
a shareholders' meeting held July 12, 1999, the name change was formally
approved with the shareholders approving Articles of Amendment to the Articles
of Incorporation of the Company.
Workfire-Nevada is completing a distributed Internet performance enhancing
system. Workfire-Nevada's proprietary and robust system is intended to provide
Internet users and content providers with products which improve the performance
and usability of the Internet. Workfire-Nevada's Genetic Caching system is
intended to provide performance improvements and bandwidth savings through
better management of the transmission of data between a web site and an
end-user. The Genetic Caching server software will be marketed to large content
providers who are looking for a competitive edge and are motivated to make their
customers' browsing experience as enjoyable as possible. Workfire-Nevada's
client software will be marketed to all Internet users. Workfire-Nevada intends
to segment the market between different Internet access methods so the benefits
of the technology can be clearly presented to each segment.
In connection with an offer to provide funding to Workfire-Nevada, on November
5, 1999, the Board of Directors of the Company approved a resolution to
distribute all of the shares of Workfire-Nevada owned by the Company, pro rata
to the Company's shareholders (the "Share Distribution"). The Share Distribution
was made to shareholders of record as at the close of business on November 12,
1999.
On February 7, 2000, the Company's shareholders approved a change of the
Company's name to BCS Investment Corporation. As a result of the Share
Distribution, the Company has no subsidiary, no current operations and no
material assets. As such, the Company can be defined as a "shell" company, whose
sole purpose at this time is to locate and consummate a merger or acquisition
with a private entity. The Board of Directors of the Company has elected to
commence implementation of the Company's principal business purpose, described
below under "Plan of Operation."
INVESTMENT COMPANY ACT OF 1940
Although the Company will be subject to regulation under the Securities Act of
1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), management believes the Company will not
be subject to regulation under the Investment Company Act of 1940, as amended
(the "Investment Company Act"), insofar as the Company will not be engaged in
the business of investing or trading in securities. In the event the Company
engages in business combinations which result in the Company holding passive
investment interests in a number of entities, the Company could be subject to
regulation under the Investment Company Act. In such event, the Company would be
required to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to the
status of the Company under the Investment Company Act and, consequently, a
violation of such Act could subject the Company to material adverse
consequences.
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INVESTMENT ADVISERS ACT OF 1940
Under Section 202(a)(11) of the Investment Advisers Act of 1940, as amended, an
"investment adviser" means any person who, for compensation, engages in the
business of advising others, either directly or through publications or
writings, as to the value of securities or as to the advisability of investing
in, purchasing, or selling securities, or who, for compensation and as part of a
regular business, issues or promulgates analyses or reports concerning
securities. The Company shall only seek to locate a suitable merger of
acquisition candidate, and does not intend to engage in the business of advising
others in investment matters for a fee or otherwise.
FORWARD LOOKING STATEMENTS
Pursuant to the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995 (the "PSLRA"), the Company cautions readers regarding forward
looking statements found in the following discussion and elsewhere in this
report and in any other statement made by, or on the behalf of the Company,
whether or not in future filings with the Securities and Exchange Commission.
Forward looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results or other
developments. Forward looking statements are necessarily based upon estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
Company's control and many of which, with respect to future business decisions,
are subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward looking statements made by or on behalf of the Company. The
Company disclaims any obligation to update forward looking statements.
PLAN OF OPERATION
The Company intends to seek to acquire assets or shares of an entity actively
engaged in a business that generates revenues, in exchange for its securities.
The Company has not identified a particular acquisition target and has not
entered into any negotiations regarding such an acquisition. Management intends
to contact investment bankers, corporate financial analysts, attorneys and other
investment industry professionals through various media. None of the Company's
officers, directors, promoters or affiliates have engaged in any preliminary
contact or discussions with any representative of any other company regarding
the possibility of an acquisition or merger between the Company and such other
company as of the date of this report.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.
While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain certain assurances of
value of the target entity's assets prior to consummating such a transaction,
with further assurances that audited financial statements would be provided
within sixty days after closing. Closing documents will include representations
that the value of the assets conveyed to or otherwise so transferred will not
materially differ from the representations included in such closing documents,
or the transaction will be voidable.
Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. The Company does not
anticipate that it will have to raise capital or acquire any plant or
significant equipment in the next twelve months, unless a merger or acquisition
target is identified.
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GENERAL BUSINESS PLAN
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its search to
any specific business, industry, or geographical location and the Company may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
be restrictive of the Company's virtually unlimited discretion to search for and
enter into potential business opportunities. Management anticipates that it may
be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources. This lack of
diversification should be considered a substantial risk to shareholders of the
Company because it will not permit the Company to offset potential losses from
one venture against gains from another.
The Company may seek a business opportunity with entities that have recently
commenced operations, or that wish to utilize the public marketplace in order to
raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.
Management anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include, among other things, facilitating or improving
the terms on which additional equity financing may be sought, providing
liquidity for incentive stock options or similar benefits to key employees, and
providing liquidity (subject to restrictions of applicable statutes) for all
shareholders. Potentially, available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
The Company has, and will continue to have, no capital with which to provide the
owners of business opportunities with any significant cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of the business
opportunities will, however, incur significant legal and accounting costs in
connection with the acquisition of a business opportunity, including the costs
of preparing annual (Form 10-K or 10-KSB), quarterly (Form 10-Q or 10-QSB) and
current reports (Form 8-K), agreements and related documents. The Exchange Act
specifically requires that any merger or acquisition candidate comply with all
applicable reporting requirements, which include providing audited financial
statements to be included within the numerous filings required under the
Securities Exchange Act. Nevertheless, the officers and directors of the Company
have not conducted market research and are not aware of statistical data which
would support the perceived benefits of a merger or acquisition transaction for
the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, the officers and directors of the Company, none of whom is a
professional business analyst. Management intends to concentrate on identifying
preliminary prospective business opportunities which may be brought to its
attention through present associations of the Company's officers and directors,
or by the Company's shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available technical,
financial and managerial resources; working capital and other financial
requirements; history of operations, if any; prospects for the future; nature of
present and expected competition; the quality and experience of management
services which may be available and the depth of that management; the potential
for further research, development, or exploration; specific risk factors not now
foreseeable but which then may be anticipated to impact the proposed activities
of the Company; the potential for growth or expansion; the potential for profit;
the perceived public recognition of acceptance of products, services, or trades;
name identification; and other relevant factors. Officers and directors of the
Company expect to meet personally with management and key personnel of the
business opportunity as part of their "due diligence" investigation. To the
extent possible, the Company intends to utilize written reports and personal
investigations to evaluate the above factors. The Company will not acquire or
merge with any company that cannot provide audited financial statements within a
reasonable period of time after closing of the proposed transaction.
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Management of the Company, while not especially experienced in matters relating
to the new business of the Company, shall rely upon their own efforts and, to a
much lesser extent, the efforts of the Company's shareholders, in accomplishing
the business purposes of the Company. It is not anticipated that any outside
consultants or advisors, except for the Company's legal counsel and accountants,
will be utilized by the Company to effectuate its business purposes. However, if
the Company does retain such an outside consultant or advisor, any cash fee
earned by such party will most likely be paid by the prospective
merger/acquisition candidate, as the Company has no cash assets with which to
pay such obligation. As of the date of this report, the Company does not have
any contracts or agreements with any outside consultants and none are
contemplated.
Management will not restrict the Company's search for any specific kind of
firms, but may acquire a venture that is in its preliminary or development stage
or is already operating. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business may
need to seek additional capital, may desire to have its shares publicly traded,
or may seek other perceived advantages which the Company may offer. Furthermore,
management does not intend to seek capital to finance the operation of any
acquired business opportunity until such time as the Company has successfully
consummated a merger or acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan. Because the Company has no capital with
which to pay these anticipated expenses, present management of the Company will
pay these charges with their personal funds, as interest free loans to the
Company. If additional funding is necessary, management and/or shareholders will
continue to provide capital or arrange for outside funding. However, the only
opportunity which management has to have these loans repaid will be from a
prospective merger or acquisition candidate. Management's agreements with the
Company contain no negative covenants that would impede or prevent consummation
of a proposed transaction. There is no assurance, however, that management will
continue to provide capital indefinitely if a merger candidate cannot be found.
If a merger candidate cannot be found in a reasonable period of time, management
may be required reconsider its business strategy, which could result in the
dissolution of the Company.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. The Company may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with the securities laws of the United States and any applicable
state.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon an exemption from registration under applicable federal
and state securities laws. In some circumstances, however, as a negotiated
element of its transaction, the Company may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after the Company has
successfully consummated a merger or acquisition and the Company is no longer
considered a "shell" company. Until a merger or acquisition is consummated, the
Company will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into the trading
market may have a depressive effect on the value of the Company's securities.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain 20% or less
of the issued and outstanding shares of the surviving entity, which would result
in significant dilution in the equity of such shareholders.
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As part of the Company's "due diligence" investigation, officers and directors
of the Company will meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis of verification of
certain information provided, check references of management and key personnel,
and take other reasonable investigative measures to the extent of the Company's
limited financial resources and management expertise. The manner in which the
Company participates in an opportunity will depend on the nature of the
opportunity, the respective needs and desires of the Company and other parties,
the management of the opportunity and the relative negotiation strength of the
Company and such other management.
With respect to any merger or acquisition negotiations with target company
management is expected to focus on the percentage of the Company which the
target company shareholders would acquire in exchange for all of their
shareholdings in the target company. Depending upon, among other things, the
target company's assets and liabilities, the Company's shareholders will in all
likelihood hold a substantially lesser percentage ownership interest in the
Company following any merger or acquisition. The percentage ownership may be
subject to significant reduction in the event the Company acquires a target
company with substantial assets. Any merger or acquisition effected by the
Company can be expected to have a significant dilutive effect on the percentage
of shares held by the Company's then shareholders.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, will set forth remedies on default and will
include miscellaneous other terms.
As stated previously, the Company will not acquire or merge with any entity that
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is subject
to the reporting requirements of the Securities Exchange Act. Included in these
requirements is the affirmative duty of the Company to file independent audited
financial statements as part of its Form 8-K to be filed with the Securities and
Exchange Commission upon consummation of a merger or acquisition, as well as the
Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the candidate to be acquired in the closing documents, the closing documents
will provide that the proposed transaction will be voidable at the discretion of
the present management of the Company. If such transaction is voided, the
agreement will also contain a provision providing for the acquisition entity to
reimburse the Company for all costs associated with the proposed transaction.
YEAR 2000 DISCLOSURE
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the year 2000. As a
result, many companies will be required to undertake major projects to address
the Year 2000 issue. Because the Company currently has no material assets,
including any personal property such as computers, it is not anticipated that
the Company will suffer any negative impact as a result of this potential
problem. However, it is possible that this issue may have an impact on the
Company after it consummates a merger or acquisition. Management intends to
address this potential problem with any prospective merger or acquisition
candidate. There can be no assurances that new management of the Company will be
able to avoid a problem in this regard after a merger or acquisition is
consummated.
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COMPETITION
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
RISK FACTORS
The Company's business is subject to numerous risk factors, including the
following:
NO REVENUE AND MINIMAL ASSETS. The Company, as a result of the Share
Distribution, has no operations or revenues. The Company has no significant
assets or financial resources. The Company will, in all likelihood, sustain
operating expenses without corresponding revenues, at least until the
consummation of a business combination. This may result in the Company incurring
a net operating loss that will increase continuously until the Company can
consummate a business combination with a profitable business opportunity. There
is no assurance that the Company can identify such a business opportunity and
consummate such a business combination.
SPECULATIVE NATURE OF COMPANY'S PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified business
opportunity. While management intends to seek business combination(s) with
entities having established operating histories, there can be no assurance the
Company will be successful in locating candidates meeting such criteria. In the
event the Company completes a business combination, the success of its
operations may be dependent upon management of the successor firm or venture
partner firm and numerous other factors beyond the Company's control.
SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND COMBINATIONS. The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with, joint ventures with and acquisitions of small private
and public entities. A large number of established and well-financed entities,
including venture capital firms, are active in mergers and acquisitions of
companies that may be desirable target candidates for the Company. Nearly all
such entities have significantly greater financial resources, technical
expertise and managerial capabilities than the Company and, consequently, the
Company will be at a competitive disadvantage in identifying possible business
opportunities and successfully completing a business combination. Moreover, the
Company will also compete in seeking merger or acquisition candidates with
numerous other small public companies.
NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION. The Company has no
arrangement, agreement or understanding with respect to engaging in a merger
with, joint venture with or acquisition of, a private or public entity. There
can be no assurance that the Company will be successful in identifying and
evaluating suitable business opportunities or in concluding a business
combination. Management has not identified any particular industry or specific
business within an industry for evaluation by the Company. There is no assurance
management will be able to negotiate a business combination on terms favorable
to the Company.
NO STANDARDS FOR BUSINESS COMBINATION. The Company has not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which the Company will require a target business
opportunity to have achieved. Accordingly, the Company may enter into a business
combination with a business opportunity having no significant operating history,
losses, limited or no potential for earnings, limited assets, negative net worth
or other characteristics that are indicative of development stage companies.
CONTINUED MANAGEMENT CONTROL, LIMITED TIME AVAILABILITY. While seeking a
business combination, management anticipates devoting up to 40 hours per month
to the business of the Company. The Company has not entered into employment
agreements with any of its current officers and is not expected to do so in the
foreseeable future. The Company has not obtained key man life insurance on any
of its officers or directors. Notwithstanding the combined limited experience
and time commitment of management, loss of the services of any of these
individuals would adversely
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affect development of the Company's business and its likelihood of continuing
operations. See "Directors, Executive Officers, Promoters and Control Persons."
CONFLICTS OF INTEREST - GENERAL. Officers and directors of the Company may
participate in business ventures which could be deemed to compete directly with
the Company. Additional conflicts of interest and non-arm's length transactions
may also arise in the event the Company's officers or directors are involved in
the management of any firm with which the Company transacts business.
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION. Sections 13 and 15(d)
of the Securities Exchange Act require reporting companies to provide certain
information about significant acquisitions, including audited financial
statements for the company acquired, covering one, two, or three years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target entities to prepare such statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may be inappropriate for
acquisition so long as the reporting requirements of the Exchange Act are
applicable.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION. The Company has neither
conducted, nor have others made available to it, results of market research
indicating that market demand exists for the transactions contemplated by the
Company. Moreover, the Company does not have, and does not plan to establish, a
marketing organization. Even in the event demand is identified for a merger or
acquisition contemplated by the Company, there is no assurance the Company will
be successful in completing any such business combination.
LACK OF DIVERSIFICATION. The Company's proposed operations, even if successful,
will in all likelihood result in the Company engaging in a business combination
with a business opportunity. Consequently, the Company's activities may be
limited to those engaged in by business opportunities which the Company merges
with or acquires. The Company's inability to diversify its activities into a
number of areas may subject the Company to economic fluctuations within a
particular business or industry and therefore increase the risks associated with
the Company's operations.
GOVERNMENT REGULATION. Although the Company will be subject to the reporting
requirements under the Exchange Act, management believes the Company will not be
subject to regulation under the Investment Company Act, insofar as the Company
will not be engaged in the business of investing or trading in securities. In
the event the Company engages in business combinations which result in the
Company holding passive investment interests in a number of entities, the
Company could be subject to regulation under the Investment Company Act. In such
event, the Company would be required to register as an investment company and
could be expected to incur significant registration and compliance costs. The
Company has obtained no formal determination from the Securities and Exchange
Commission as to the status of the Company under the Investment Company Act and,
consequently, violation of such Act could subject the Company to material
adverse consequences.
PROBABLE CHANGE IN CONTROL AND MANAGEMENT. A business combination involving the
issuance of the Company's common stock will, in all likelihood, result in
shareholders of a private company obtaining a controlling interest in the
Company. Any such business combination may require management and/or affiliates
of the Company to sell or transfer all or a portion of the Company's common
stock held by them, or resign as members of the Board of Directors of the
Company. The resulting change in control of the Company could result in removal
of one or more present officers and directors of the Company and a corresponding
reduction in or elimination of their participation in the future affairs of the
Company.
REDUCTION OF PERCENTAGE SHARE OWNERSHIP FOLLOWING A BUSINESS COMBINATION. The
Company's primary plan of operation is based upon a business combination with a
private concern which, in all likelihood, would result in the Company issuing
securities to shareholders of any such private company. The issuance of
previously authorized and unissued common stock of the Company would result in a
reduction in the percentage of shares owned by present and prospective
shareholders of the Company and may result in a change in control or management
of the Company.
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"PENNY" STOCK REGULATION OF BROKER-DEALER SALES OF COMPANY SECURITIES. The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in "penny stocks". Generally, penny stocks are equity securities
with a price of less than $5.00 (other than securities registered on certain
national securities exchanges or quoted on the NASDAQ system). If the Company's
shares are traded for less than $5 per share, as they currently are, the shares
will be subject to the SEC's penny stock rules unless (1) the Company's net
tangible assets exceed $5,000,000 during the Company's first three years of
continuous operations or $2,000,000 after the Company's first three years of
continuous operations; or (2) the Company has had average revenue of at least
$6,000,000 for the last three years. The penny stock rules require a
broker-dealer, prior to a transaction in a penny stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prescribed by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules require that prior to
a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These requirements may have the effect of reducing
the level of trading activity in the secondary market for a stock that becomes
subject to the penny stock rules. As long as the Company's Common Stock is
subject to the penny stock rules, the holders of the Common Stock may find it
difficult to sell the Common Stock of the Company.
TAXATION. Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination the Company may undertake. Currently,
such transactions may be structured so as to result in tax-free treatment to
both companies, pursuant to various federal and state tax provisions. The
Company intends to structure any business combination so as to minimize the
federal and state tax consequences to both the Company and the target entity;
however, there can be no assurance that such business combination will meet the
statutory requirements of a tax-free reorganization or that the parties will
obtain the intended tax-free treatment upon a transfer of stock or assets. A
non-qualifying reorganization could result in the imposition of both federal and
state taxes which may have an adverse effect on both parties to the transaction.
REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. Management believes that any potential business opportunity must
provide audited financial statements for review for the protection of all
parties to the business combination. One or more attractive business
opportunities may choose to forego the possibility of a business combination
with the Company, rather than incur the expenses associated with preparing
audited financial statements.
EMPLOYEES
The Company has no full time employees. The Company's President and Secretary
have agreed to allocate a portion of their time to the activities of the
Company, without compensation. These officers anticipate that the business plan
of the Company can be implemented by their devoting an aggregate of 40 hours per
month to the business affairs of the Company and, consequently, conflicts of
interest may arise with respect to the limited time commitment by such officers.
The Company does not expect any significant changes in the number of employees,
until the Company completes a business combination.
The Company's officers and directors may become involved with other companies
who have a business purpose similar to that of the Company. As a result,
potential conflicts of interest may arise in the future. If such a conflict does
arise and an officer or director of the Company is presented with business
opportunities under circumstances where there may be a doubt as to whether the
opportunity should belong to the Company or another "shell" company they are
affiliated with, they will disclose the opportunity to all such companies.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company has no properties and at this time has no agreements to acquire any
properties. The Company intends to attempt to acquire assets or a business in
exchange for its securities.
9
<PAGE>
The Company operates from its offices at 1708 Dolphin Avenue, Suite 400,
Kelowna, British Columbia, V1Y 9S4 Canada. Space is provided to the Company on a
rent free basis by Workfire Development Corporation, and it is anticipated that
this arrangement will remain until such time as the Company successfully
consummates a merger or acquisition. Management believes that this space will
meet the Company's needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Shares have been listed on the Over-the-Counter Bulletin
Board (the "OTC Bulletin Board") operated by the National Association of
Securities Dealers (the "NASD"), since approximately October 16, 1999. The
Company's shares were listed under the symbol "BUFK", until approximately June
21, 1999. As a result of the Reorganization and Stock Purchase Agreement, the
Company's symbol changed to "WKFR" and its shares were traded under that symbol
until approximately February 11, 2000. Currently, the Company's shares are
listed under the symbol "BCSC". The following table sets forth the range of high
and low closing bid quotations of the common stock for each quarter since
October 16, 1999:
<TABLE>
<CAPTION>
BID OR TRADE PRICES
1999 FISCAL YEAR HIGH LOW
<S> <C> <C>
Quarter Ending 06/30/99................................... $6.125 $4.438
Quarter Ending 09/30/99................................... $6.000 $1.000
Quarter Ending 12/31/99................................... $2.750 $0.312
</TABLE>
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
The last reported bid and ask prices of the Company's Common Stock by the OTC
Bulletin Board were both $0.5625, respectively, on February 11, 2000.
The above quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not represent actual transactions.
As of April 11, 2000, there were 142 record holders of the Company's Common
Stock.
During the last two fiscal years, no cash dividends have been declared on the
Company's common stock and management does not anticipate that dividends will be
paid in the foreseeable future.
10
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES
None.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
The Company was incorporated under the laws of the State of Colorado on
September 19, 1997. From its inception to June 18, 1999, the Company operated as
a "shell" company and its business plan was to seek out and take advantage of
business opportunities that may have had the potential for profit, and to
acquire such businesses, or a controlling interest therein.
On June 18, 1999, a change in control of the Company occurred, in conjunction
with closing under a Reorganization and Stock Purchase Agreement between the
Company and Workfire-Nevada. As the result of a Reorganization and Stock
Purchase Agreement, the Company acquired 89.00% of the issued and outstanding
shares of Workfire-Nevada. On November 5, 1999, the board of directors of the
Company approved a resolution to distribute all of the shares of Workfire-Nevada
owned by the Company, pro rata to the Company's shareholders. The Share
Distribution was made to shareholders of record as at the close of business on
November 12, 1999.
As of the date of this report the Company had no source of income and must rely
entirely upon loans and equity investments from affiliates to pay operating
expenses.
Accordingly, the financial statements for the year ended December 31, 1999,
reflect the operations and cash flows of Workfire-Nevada for the period January
1, 1999 to November 12, 1999, combined with those of the parent (the shell
company) from acquisition on June 18, 1999. The comparative figures for the
period from July 7, 1998 to December 31, 1998 are those of Workfire-Nevada.
PLAN OF OPERATION
The Company currently has no capital to fund operations or on-going expenses.
The Company must rely upon loans and investments from affiliates to pay
operating expenses. There are no assurances that such affiliates will continue
to advance funds to the Company or will continue to invest in the Company's
securities. In the event the Company is unable to obtain additional financing it
may be unable to identify and/or acquire a suitable business opportunity. During
the twelve months following the filing of this report, management intends to
seek to acquire assets or shares of an entity actively engaged in a business
that generates revenues, in exchange for the Company's securities. The Company
has not identified a particular acquisition target and has not entered into any
negotiations regarding such an acquisition. Management intends to contact
investment bankers, corporate financial analysts, attorneys and other investment
industry professionals through various media. None of the Company's officers,
directors, promoters or affiliates have engaged in any preliminary contact or
discussions with any representative of any other company regarding the
possibility of an acquisition or merger between the Company and such other
company as of the date of this report.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Directors expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the form
of a proxy, information statement, or report.
While such disclosure may include audited financial statements of such a target
entity, there is no assurance that such audited financial statements will be
available. The Board of Directors does intend to obtain certain assurances of
value of the target entity's assets prior to consummating such a transaction,
with further assurances that audited financial statements would be provided
within sixty days after closing. Closing documents will include representations
that the
11
<PAGE>
value of the assets conveyed to or otherwise so transferred will not materially
differ from the representations included in such closing documents, or the
transaction will be voidable.
Due to the Company's intent to remain a shell company until a merger or
acquisition candidate is identified, it is anticipated that its cash
requirements will be minimal, and that all necessary capital, to the extent
required, will be provided by the directors or officers. The Company does not
anticipate that it will have to raise capital or acquire any plant or
significant equipment in the next twelve months, unless a merger or acquisition
target is identified.
LIQUIDITY
The Company's cash flows from operating activities during 1999 and 1998 were
$(713,497) and $(317,749), respectively. The increase from 1998 to 1999 is
attributed to the Company's increased net loss during the 1999 fiscal year. The
Company's cash flows from financing activities during 1999 and 1998 were
$507,728 and $679,635, respectively. The Company's financing activities during
1999 consisted primarily of the issuance of common shares for cash ($262,667)
and advances from a shareholder ($224,990). The Company expended $108,363 and
$47,018 on capital assets during 1999 and 1998, respectively. The increase is
related to the acquisition of a significant amount of computer assets and
equipment during 1999.
At December 31, 1999 and 1998, the Company had working capital of $11,313, and
$309,265, respectively. The decrease in working capital is a result of the
distribution of the shares of Workfire-Nevada to the Company's shareholders.
Workfire-Nevada was the Company's operating subsidiary and the loss of the
operating subsidiary has left the Company with no material assets.
Since the Company has no significant source of revenue, working capital will
continue to be depleted by operating expenses. See "Results of Operations"
below. The Company presently has no external sources of cash and is dependent
upon its management and shareholders for funding.
ASSETS
At December 31, 1999, the Company had total assets of $25,206, compared to total
assets of $378,876 at December 31, 1998. The majority of the Company's assets at
December 31, 1999, consisted of prepaid marketing expenses. At December 31,
1998, the majority of the Company's assets consisted of cash. As of the date of
this report, the Company has essentially no assets.
RESULTS OF OPERATIONS
The Company has no current operations and has not generated any revenue from its
operations since the change of control. The Company must rely entirely upon
loans from affiliates pay operating expenses.
During the fiscal years ended December 31, 1999, and 1998 the Company had net
losses of $793,190 and $328,086, respectively. Due to the Share Distribution as
of the date of this report, the Company essentially has no operations and no
source of revenue. The Company continues to incur professional fees and other
expenses. If the Company does not find a suitable acquisition target or other
source of revenue, the Company will continue to incur net losses and may have to
cease operations entirely. This factor, among others, raises substantial and
compelling doubt about the Company's ability to continue as a going concern.
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a timely
basis, to identify and close an acquisition with a suitable target company,
obtain additional financing or refinancing as may be required, and ultimately to
attain profitability. There are no assurances that the Company will be able to
obtain identify a suitable acquisition target, close such acquisition, obtain
any such financing or, if the Company is able to obtain additional financing,
that such financing will be on terms favorable to the Company. The inability to
obtain additional financing when needed will have a material adverse effect on
the Company's operating results.
12
<PAGE>
IMPACT OF THE YEAR 2000
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect the Company's ability to conduct normal business operations. The only
software utilized by the Company is a general ledger accounting program.
Management believes the Company does not face significant internal risk from
computer failure or errors due to the Year 2000 Issue. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the Company, including
those related to the efforts of customers, suppliers, or other third parties,
will be fully resolved. As of the date of this report, the Company has not
experienced any problems related to the Year 2000.
ITEM 7. FINANCIAL STATEMENTS.
Please refer to the pages beginning with F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The officers and directors of the Company are:
NAME AGE TITLE(S)
---- --- --------
Nicholas Miller 48 President since November 1999
Director since June 1999
Philip Stern 40 Director since June 1999
Treasurer and Secretary since April 2000
Thereafter, directors will be elected for one-year terms at the annual
stockholders' meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
shareholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management shareholders and management under which
non-management shareholders may directly or indirectly participate in or
influence the management of the Company's affairs.
The directors and officers will devote their time to the Company's affairs on an
"as needed" basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely will fall within the range of five to ten hours per month. There are no
agreements or understandings for any officer
13
<PAGE>
or director to resign at the request of another person, and none of the officers
or directors are acting on behalf of, or will act at the direction of, any other
person.
NICHOLAS MILLER. Mr. Miller has over 25 years of experience in both small
entrepreneurial and large corporate structures, and over 18 years of direct P &
L responsibility. As the founder of several high-technology oriented
corporations, Mr. Miller has accumulated a wealth of experience in
high-technology start-ups, marketing, management, and the financing of new
ventures.
From 1994 to 1996, Mr. Miller was Founder, President, CEO and Chairman of the
DataLink Systems Corporation. DataLink is a leading provider of Personal
Information Services delivered using wireless technologies, including
alphanumeric paging, digital cellular/PCS short message service, cellular
digital packet data and other emerging personal communications technologies.
Before DataLink, he owned a consulting practice that provided advice to emerging
growth and middle-market companies in the US and Canada, and founded a number of
companies in the software distribution and manufacturing sectors.
PHILIP STERN. Since 1996, Mr. Stern has operated as a consultant through his
company, Net Q & A, Inc., providing business plan development services primarily
to clients in the high-technology sector. From 1990 through 1996, Mr. Stern was
CEO of Simon/Ross & Associates, Inc., which was engaged in the business of
providing MacIntosh computer training. From 1986 to 1988, he directed the
customer marketing function for MDI Mobile Data International which was engaged
in the business of development and sale of mobile data communications system. He
holds a bachelor's degree from McGill University and an MBA from Harvard
Business School.
There are no family relationships between any executive officer and/or director
of the Company.
LEGAL PROCEEDINGS
To the best of the Company's knowledge, during the past five years no director,
person nominated to become a director, executive officer, promoter or control
person of the Company has:
(1) Had any bankruptcy petition filed by or against any business
of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two
years prior to that time;
(2) Had any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations
and other minor offenses);
(3) Been subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in
any type of business, securities or banking activities; or
(4) Been found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the
Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated.
PRIOR "SHELL" COMPANY EXPERIENCE
None of the Company's officers and/or directors have had any direct experience
in identifying emerging companies for investment and/or business combinations.
CONFLICTS OF INTEREST
Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
management anticipates they will devote only a minor amount of time to the
Company's affairs.
14
<PAGE>
The officers and directors of the Company are now and may in the future become
shareholders, officers or directors of other companies which may be formed for
the purpose of engaging in business activities similar to those conducted by the
Company. Accordingly, additional direct conflicts of interest may arise in the
future with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the performance
of their duties or otherwise. The Company does not currently have a right of
first refusal pertaining to opportunities that come to management's attention
insofar as such opportunities may relate to the Company's proposed business
operations.
The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, then said officers and directors
would abstain from negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so. Except as set forth above, the Company has not adopted
any other conflict of interest policy with respect to such transactions.
The Company does not have any standing audit, nominating, or compensation
committees of the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and Nasdaq. Officers,
directors and greater than 10% percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file. To the best of the Company's knowledge, Grant Peck, Dean Sessions, or Gary
Joiner, former officers and directors of the Company, have not filed any Form
5's for the fiscal year ended December 31, 1999. Tom Taylor, a former officer
and director of the Company and currently a principal shareholder of the
Company, has not filed a Form 5 for the fiscal year ended December 31, 1999.
Nicholas Miller, an officer and director of the Company, did not file any Form
3's upon being appointed as an officer and director of the Company. In addition,
to the best of the Company's knowledge, other than reports filed by Tom and
Allison Taylor, no reports were filed by any other persons who owned 10% or more
of the Company's registered equity securities during the period covered by this
report.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth information for Grant W. Peck and Tom Taylor, the
Chief Executive Officers ("CEO") of the Company during the fiscal year ended
December 31, 1999. No disclosure need be provided for any executive officer,
other than the CEO, whose total annual salary and bonus for the last completed
fiscal year did not exceed $100,000. Accordingly, no other executive officers of
the Company are included in the table.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND COMPEN- AWARDS OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION ($) ($) SARS($) PAYOUTS ($) SATION ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Grant W. Peck, 1999 -0- -0- -0- -0- -0- -0- -0-
President and Chief 1998 -0- -0- -0- -0- -0- -0- -0-
Executive Officer(1)<F1>1997 -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
15
<PAGE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------------------------------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND COMPEN- AWARDS OPTIONS/ LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION ($) ($) SARS($) PAYOUTS ($) SATION ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tom Taylor, President 1999(3)<F3> 84,000(C$) -0- -0- -0- -0- -0- -0-
President and Chief 1998(3)<F3> 32,000 (C$) -0- -0- -0- 300,000(5) -0- -0-
Executive Officer(2)<F2>1997(3)<F3> -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas Miller, 1999 -0- -0- -0- -0- -0- -0- -0-
President and Chief 1998 -0- -0- -0- -0- -0- -0- -0-
Executive Officer(4)<F4>1997 -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
<F1>
(1) Mr. Peck resigned effective June 18, 1999.
<F2>
(2) Mr. Taylor was appointed President and CEO effective June 19, 1999 and
he resigned effective November 12, 1999.
<F3>
(3) Compensation paid through Workfire-Nevada.
<F4>
(4) Mr. Miller was appointed President and CEO effective November 12, 1999.
<F5>
(5) Includes 150,000 options granted to his wife, Allison Taylor.
</FN>
</TABLE>
The Company does not have any employment contracts with any of its officers or
directors. Such persons are employed by the Company on an at will basis, and the
terms and conditions of employment are subject to change by the Company.
STOCK OPTION PLANS
During June 1999, the Company's board of directors adopted the Company's 1999
Stock Option Plan. The terms of the plan are summarized below. Options were
granted under the plan to employees of Workfire-Nevada, which at the time was a
subsidiary of the Company. As a result of the Share Distribution, these
employees ceased to be employees of the Company and, as such, the options issued
to those employees were terminated in accordance with the plan. As of April 11,
2000, no options were outstanding under the plan.
Pursuant to the 1999 Stock Option Plan (the "Plan") an aggregate of 1,375,840
shares of the Company's common stock (the "Available Shares") has been reserved
for issuance pursuant to the exercise of stock options ("Options") which may be
granted to employees, officers, and directors of the Company and consultants to
the Company. The Plan also provides for annual adjustment in the number of
Available Shares, commencing upon the beginning of the next fiscal year, to a
number equal to 9% of the number of shares outstanding as of the end of the
preceding fiscal year or 1,375,840 shares, whichever is greater.
The Plan is designed to (i) induce qualified persons to become employees,
officers, or directors of the Company; (ii) reward such persons for past
services to the Company; (iii) encourage such persons to remain in the employ of
the Company or associated with the Company; and (iv) provide additional
incentive for such persons to put forth maximum efforts for the success of
business of the Company. No stock options have been granted under this Plan.
The Plan will be administered by the Board of Directors (the "Board").
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as amended
(the "1934 Act"). In addition to determining who will be granted Options, the
Board has the authority and discretion to determine when Options will be granted
and the number of Options to be granted. The Board may determine which Options
may be intended to qualify ("Incentive Stock Option") for special treatment
under the Internal Revenue Code of 1986, as amended from time to time (the
"Code") or Non-Qualified Options ("Non-Qualified Stock Options") which are not
intended to so qualify. See "Federal Income Tax Consequences" below. The Board
also may determine the time or times when each Option becomes exercisable, the
duration of the exercise period for Options and the form or forms of the
instruments evidencing Options granted under the Plan. The Board may adopt,
amend, and rescind such rules and regulations as in its opinion may be advisable
for the administration of the Plan. The Board may amend the Plan without
shareholder approval where such approval is not required to satisfy any
statutory or regulatory requirements.
16
<PAGE>
Grants to employee directors and officer/directors can be either Non-Qualified
Stock Options or Incentive Stock Options, to the extent that they do not exceed
the Incentive Stock Option exercise limitations, and the portion of an option to
an employee director or officer/director that exceeds the dollar limitations of
Code Section 422 will be treated as a Non-Qualified Stock Option.
The Board also may construe the Plan and the provisions in the instruments
evidencing options granted under the Plan to employee and officer participants
and is empowered to make all other determinations deemed necessary or advisable
for the administration of the Plan. The Board may not adversely affect the
rights of any participant under any unexercised option or any potion thereof
without the consent of such participant. This Plan will remain in effect until
it is terminated by the Board, except that no Incentive Stock Option will be
granted after December 15, 2009.
The Plan contains provisions for proportionate adjustment of the number of
shares for outstanding options and the option price per share in the event of
stock dividends, recapitalizations resulting in stock splits or combinations or
exchanges of shares.
Participants in the Plan may be selected by the Board from employees and
officers of the Company and its subsidiaries and consultants to the Company and
its subsidiaries. In determining the persons to whom options will be granted and
the number of shares to be covered by each option, the Board will take into
account the duties of the respective persons, their present and potential
contributions to the success of the Company, and such other factors as the Board
deems relevant to accomplish the purposes of the Plan.
Only employees of the Company and its subsidiaries, as the term "employee" is
defined for the purposes of the Code, and consultants to the Company will be
entitled to receive Incentive Stock Options. Incentive Stock Options granted
under the Plan are intended to satisfy all requirements for incentive stock
options under Section 422 of the Code and the Treasury Regulations thereunder.
Each option granted under the Plan will be evidenced by a written option
agreement between the Company and the optionee. The option price of any
Incentive Stock Option may be not less than 100% of the Fair Market Value per
share on the date of grant of the option; provided, however, that any Incentive
Stock Option granted under the Plan to a person owning more than ten percent of
the total combined voting power of the common stock will have an option price of
not less than 110% of the Fair Market Value per share on the date of grant of
the Incentive Stock Option. Each Non-Qualified Stock Option granted under the
Plan will be at a price no less than 85% of the Fair Market Value per share on
the date of grant thereof. "Fair Market Value" per share as of a particular date
is defined in the Plan as the last sale price of the Company's common stock as
reported on a national securities exchange or on the NASDAQ System or, if none,
the average of the closing bid and asked prices of the Company's common stock as
reported by NASDAQ or, if such quotations are unavailable, the value determined
by the Board in its discretion in good faith.
The exercise period of options granted under the Plan may not exceed ten years
from the date of grant thereof. Incentive Stock Options granted to a person
owning more than ten percent of the total combined voting power of the common
stock of the Company will be for no more than five years. The Board will have
the authority to accelerate or extend the exercisability of any outstanding
option at such time and under such circumstances as it, in its sole discretion,
deems appropriate. However, no exercise period may be extended to increase the
term of the option beyond ten years from the date of the grant.
To exercise an option, the optionee must pay the full exercise price in cash, in
shares of common stock having a Fair Market Value equal to the option price or
in property or in a combination of cash, shares, and property and, subject to
approval of the Board. The Board has the sole and absolute discretion to
determine whether or not property other than cash or common stock may be used to
purchase the shares of common stock thereunder and, if so, to determine the
value of the property received.
An option may not be exercised unless the optionee then is an employee, officer,
or director of the Company or its subsidiaries, and unless the optionee has
remained continuously as an employee, officer, or director of the Company since
the date of grant of the option. If the optionee ceases to be an employee,
officer, or director of the Company or its
17
<PAGE>
subsidiaries other than by reason of death, disability, or for cause, all
options granted to such optionee, fully vested to such optionee but not yet
exercised, will terminate three months after the date the optionee ceases to be
an employee, officer or director of the Company. All options which are not
vested to an optionee, under the conditions stated in this paragraph for which
employment ceases, will immediately terminate on the date the optionee ceases
employment or association.
If an optionee dies while an employee, officer or director of the Company, or if
the optionee's employment, officer, or director status terminates by reason of
disability, all options theretofore granted to such optionee, whether or not
otherwise exercisable, unless earlier terminated in accordance with their terms,
may be exercised at any time within one year after the date of death or
disability of said optionee, by the optionee or by the optionee's estate or by a
person who acquired the right to exercise such options by bequest or inheritance
or otherwise by reason of the death or disability of the optionee.
Options granted under the Plan are not transferable other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, or the rules thereunder. Options may be exercised, during
the lifetime of the optionee, only by the optionee and thereafter only by his
legal representative. An optionee has no rights as a shareholder with respect to
any shares covered by an option until the option has been exercised.
As a condition to the issuance of shares upon the exercise of an option, the
Company will require the optionee to pay to the Company the amount of the
Company's tax withholding liability required in connection with such exercise.
The Company, to the extent permitted or required by law, may deduct a sufficient
number of shares due to the optionee upon exercise of the option to allow the
Company to pay such withholding taxes. The Company is not obligated to advise
any optionee of the existence of any tax or the amount which the Company will be
so required to withhold.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is included for general
information only. Optionees are urged to consult their tax advisors to determine
the particular tax consequences applicable to them, including the application
and effect of foreign, state, and local income and other tax laws.
INCENTIVE STOCK OPTIONS. No income results to the holder of an Incentive Stock
Option upon the grant thereof or issuance of shares upon exercise thereof. The
amount realized on the sale or taxable exchange of the Option Shares in excess
of the option exercise price will be considered a capital gain, except that, if
a sale, taxable exchange, or other disposition occurs within one year after
exercise of the Incentive Stock Option or two years after the grant of the
Incentive Stock Option (generally considered to be a "disqualifying
disposition"), the optionee will realize compensation, for federal income tax
purposes, on the amount by which the lesser of (i) the fair market value on the
date of exercise or (ii) the amount realized on the sale of the shares, exceeds
the exercise price. Any appreciation on the shares between the exercise date and
the disposition will be taxed to the optionee as capital gain. The difference
between the exercise price and the fair market value of the shares acquired at
the time of exercise is a tax preference item for the purpose of calculating the
alternative minimum tax on individuals under the Code. This preference amount
will not be included again in alternative minimum taxable income in the year the
taxpayer disposes of the stock.
NON-QUALIFIED STOCK OPTIONS. No compensation will be realized by the optionee of
a Non-Qualified Stock Option at the time it is granted. Upon the exercise of a
Non-Qualified Stock Option, an optionee will realize compensation for federal
income tax purposes on the difference between the exercise price and the fair
market value of the shares acquired at the time of exercise. If the optionee
exercises a Non-Qualified Stock Option by surrendering shares of the Company's
common stock, the optionee will not recognize income or gain at the time of
exercise.
CONSEQUENCES TO THE COMPANY. The Company recognizes no deduction at the time of
grant or exercise of an Incentive Stock Option and recognizes no deduction at
the time of grant of a Non-Qualified Stock Option. The Company will recognize a
deduction at the time of exercise of a Non-Qualified Stock Option on the
difference between the option price and the fair market value of the shares on
the date of grant. The Company also will recognize a deduction to the extent the
optionee recognizes income upon a disqualifying disposition of shares underlying
an Incentive Stock Option.
18
<PAGE>
VESTING
Unless otherwise specified in an optionee's agreement, options granted under the
Plan will become vested with the optionee over a two-year period, with one-sixth
of the options vesting every four months, in addition to any other vesting
requirements determined by the Board at the time of grant.
EMPLOYMENT AGREEMENTS
The Company does not have any employment agreements with any of its officers or
directors.
DIRECTORS COMPENSATION
The Company does not compensate directors in their capacity as such. The Company
does compensate directors for services provided in other capacities.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information, as of April 11, 2000, with respect
to the beneficial ownership of the Company's common stock by each person known
by the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock and by directors and officers of the Company, both
individually and as a group:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF SHARES OWNED BENEFICIALLY
BENEFICIAL OWNER AND OF RECORD PERCENT OF CLASS (1)<F1>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tom & Allison Taylor 2,971,348 21.2%
3985 Gallaghers Circle
Kelowna, British Columbia
V1W 3Z9 Canada
- ---------------------------------------------------------------------------------------------------------
CEDE & Co.(2)<F2> 3,417,023 24.4%
P.O. Box 222
Bowling Green Station
New York, NY 10274
- ---------------------------------------------------------------------------------------------------------
Lloydminister Enterprises Ltd. 1,648,255 11.8%
The Glassmill
1 Battersea Bridge Road
London, England SW11 3BG
- ---------------------------------------------------------------------------------------------------------
Eastlane Trading Limited 1,401,578 10.0%
28 Harcourt Street
Dublin 2 Ireland
- ---------------------------------------------------------------------------------------------------------
Walsall Trading Ltd. 762,458 5.5%
c/o United House
14/16 Nelson Street
Douglas, Isle of Man
- ---------------------------------------------------------------------------------------------------------
Phillip Stern 35,880 0.3%
49 Alberta Avenue
Toronto, Ontario
Canada M6H 2R5
19
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF SHARES OWNED BENEFICIALLY
BENEFICIAL OWNER AND OF RECORD PERCENT OF CLASS (1)<F1>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Nicholas Miller -0- --
8135 East Butherus, Suite 3
Scottsdale, Arizona 85260
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Officers and directors as a group 35,880 .3%
(2 persons)
- ---------------------------------------------------------------------------------------------------------
- -----------------
<FN>
<F1>
(1) Where persons listed on this table have the right to obtain additional
shares of common stock through the conversion of convertible securities
within 60 days from the date of this Report, these additional shares
are deemed to be outstanding for the purpose of computing the
percentage of common stock owned by such persons, but are not deemed to
be outstanding for the purpose of computing the percentage owned by any
other person. Percentages are based on 14,046,080 shares of common
stock outstanding as of April 11, 2000.
<F2>
(2) CEDE & Co. holds the shares in nominee name on behalf of broker-dealer
firms.
</FN>
</TABLE>
CHANGES OF CONTROL
A business combination involving the issuance of the Company's common stock
will, in all likelihood, result in shareholders of a private company obtaining a
controlling interest in the Company. Any such business combination may require
the current shareholders of the Company to sell or transfer all or a portion of
their common stock and/or resign from their positions as officers and/or
directors of the Company. The resulting change in control of the Company could
result in removal of the current management, and a corresponding reduction in or
elimination of their participation in the future affairs of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
At December 31, 2000, the Company owed $22,035 to Workfire-Nevada, a former
subsidiary of the Company and current shareholder of the Company, for advances
made to the Company for operating expenses.
Under the terms of the Reorganization Agreement and related agreements, Grant W.
Peck and Dean F. Sessions, who were directors, officers and principal
shareholders of the Company, and Gary S. Joiner who was a principal shareholder
of the Company, each sold a substantial number of Class A and Class B Warrants.
The warrants sold were part of the units issued by the Company at inception in
consideration of pre-incorporation services rendered. At the time of issuance,
the units were valued at a total of $17,400.
Pursuant to the Reorganization Agreement and related agreements, the selling
price for such Warrants was a total of approximately $147,000. Accordingly, each
of the former officers, directors and principal shareholders of the Company
realized a substantial profit from the sale of Warrants under the Warrant
Purchase Agreement executed in conjunction with the Reorganization Agreement.
The Company employed the law firm of Frascona, Joiner & Goodman, P.C., in which
one of its former principal shareholders, Gary S. Joiner, is a shareholder, to
provide legal services in connection with its organization, the registration of
its shares, the filing of periodical reports under the Securities Exchange Act
of 1934, and in conjunction with negotiation and closing under the
Reorganization Agreement. This firm was paid fees for such services based upon
the normal hourly rates of the persons providing legal services.
Until June 1999, rent was provided to the Company at no charge by Grant W. Peck,
the former President of the Company. Until the change of control, the Company
accrued $50 per month as additional paid-in capital for this use.
20
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
(a) Exhibits:
<CAPTION>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
3.1 Articles of Incorporation, as amended (3)<F3> 34
3.2 Bylaws (1)<F1> N/A
4.1 Warrant Agent Agreement (1)<F1> N/A
4.2 Specimen Class A Warrant Certificate (1)<F1> N/A
4.3 Specimen Class B Warrant Certificate (1)<F1> N/A
4.4 Stock Option Plan 37
11 Statement Re: Computation of Per Share Earnings See Financial Statements
27 Financial Data Schedule 50
99.1 Reorganization and Stock Purchase Agreement (2)<F2> N/A
- ---------------------------
<FN>
<F1>
(1) Incorporated by reference from the Registration Statement on Form 10-SB
filed with the Securities and Exchange Commission on March 4, 1998.
<F2>
(2) Incorporated by reference from the Current Report on Form 8-K filed
with the Securities and Exchange Commission dated June 18, 1999.
<F3>
(3) The Company's Articles of Incorporation are incorporated by reference
from the Registration Statement on Form 10-SB filed with the Securities
and Exchange Commission on March 4, 1998. The amendments to the
Articles of Incorporation relating to the change of the Company's name
from Buffalo Capital VII, Ltd. to Workfire.com, Inc. and its subsequent
change from Workfire.com, Inc. to BCS Investment Corporation are being
filed as Exhibit 3.1 to this Form 10-KSB.
</FN>
</TABLE>
(b) The following reports on Form 8-K were filed during the last quarter of
the period covered by this report:
Form 8-K dated November 5, 1999 reporting the distribution of
Workfire-Nevada shares to shareholders of the Corporation and an
agreement with a third-party to provide funding to Workfire-Nevada.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BCS INVESTMENT CORPORATION
Dated: April 13, 2000 By:/S/NICHOLAS MILLER
Nicholas Miller, President
In accordance with the Securities Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/S/NICHOLAS MILLER President and Director
Nicholas Miller (Principal Executive Officer) APRIL 13, 2000
Secretary, Treasurer and Director
/S/PHILIP STERN (Principal Financial and Accounting Officer)
Philip Stern APRIL 14, 2000
</TABLE>
22
<PAGE>
Financial Statements of
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
December 31, 1999
<PAGE>
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the balance sheets of Workfire.com, Inc., a development stage
enterprise, as at December 31, 1999 and 1998 and the statements of loss,
stockholders' equity and comprehensive income and cash flows for the fiscal
periods then ended. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1999 and 1998
and the results of its operations and its cash flows for the fiscal periods then
ended in accordance with generally accepted accounting principles in the United
States of America.
/S/KPMG LLP
Kelowna, Canada
February 14, 2000
F-1
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Balance Sheets
$ United States
December 31, 1999 and 1998
<TABLE>
<CAPTION>
==================================================================================================
1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ - $ 315,658
Accounts receivable - 4,297
Prepaid expenses 25,206 5,326
---------------------------------------------------------------------------------------------
25,206 325,281
Due from related parties - 10,521
Capital assets - 43,074
- --------------------------------------------------------------------------------------------------
$ 25,206 $ 378,876
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities $ 13,893 $ 16,016
Due to related party (note 3) 22,035 9,943
Stockholders' equity (deficiency)
Capital stock (note 4) 58,133 2,080
Additional paid in capital 837,370 678,133
Deficit accumulated during the development stage (905,402) (328,086)
Accumulated comprehensive income (823) 790
----------------------------------------------------------------------------------------------
(10,722) 352,917
- ---------------------------------------------------------------------------------------------------
$ 25,206 $ 378,876
===================================================================================================
</TABLE>
See accompanying notes to financial statements.
Approved by the Board:
- --------------------------------- Director
- --------------------------------- Director
F-2
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Statements of Loss
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
================================================================================================================
From inception
(July 7, 1998) to
December 31, 1999 1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Interest $ 10,422 $ 8,847 $ 1,575
Expenses
Research and development
Consultants 42,049 41,490 559
Internet access charges 8,454 6,336 2,118
Purchased research and development 100,000 - 100,000
Salaries and benefits 396,143 299,063 97,080
--------------------------------------------------------------------------------------------------------
546,646 346,889 199,757
General and administrative
Amortization 26,820 22,876 3,944
Consulting 16,838 16,838 -
Foreign exchange 10,424 10,424 -
Interest on long term debt 5,050 5,050 -
Marketing and promotion 106,514 91,179 15,335
Office and administration 53,148 40,563 12,585
Professional fees 73,856 62,883 10,973
Rent and utilities 49,849 38,051 11,798
Salaries and benefits 171,321 112,127 59,194
Travel 52,860 36,785 16,075
Write off of loan receivable 10,707 10,707 -
Write off of goodwill on purchase of
shares held by minority stockholders 65,420 65,420 -
--------------------------------------------------------------------------------------------------------
642,807 512,903 129,904
- ----------------------------------------------------------------------------------------------------------------
Loss before income taxes and minority interest (1,179,031) (850,945) (328,086)
Income taxes 2,234 2,234 -
- ----------------------------------------------------------------------------------------------------------------
Loss before minority interest (1,181,265) (853,179) (328,086)
Minority interest in loss of former subsidiary 59,989 59,989 -
- ----------------------------------------------------------------------------------------------------------------
Net loss $ (1,121,276) $ (793,190) $ (328,086)
================================================================================================================
Weighted average number of shares outstanding 12,589,664 13,350,662 11,020,374
Loss per share $ (0.09) $ (0.06) $ (0.03)
================================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Statements of Stockholders' Equity and Comprehensive Income
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
==================================================================================================================================
Deficit
Accumulated
Number Additional During the Accumulated
of Capital Paid in Development Comprehensive
Shares Stock Capital Stage Income Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WTI
- ----------------------------------------------------------------------------------------------------------------------------------
Issued July 7, 1998 for cash
at $0.0001 per share 8,032,000 $ 803 $ - $ - $ - $ 803
Issued August 19, 1998 for
cash at Cdn $0.20 (US $0.13) 1,250,000 125 166,542 - - 166,067
Issued August 20, 1998 for
cash at Cdn $1.00 (US $0.67) 350,000 35 233,298 - - 233,333
Adjustment to record business
combination (note 2(b)) 2,368,000 1,080 (1,070) - - 10
Issued effective November 23, 1998
pursuant to Offering Disclosure
Document at $0.75 per share 372,533 37 279,363 - - 279,400
Loss - - - (328,086) - (328,086)
Foreign currency translation
adjustment - - - - 790 790
- ----------------------------------------------------------------------------------------------------------------------------------
WTI balance, December 31, 1998 12,372,533 2,080 678,133 (328,086) 790 352,917
Issued March 11, 1999 pursuant to
Offering Disclosure Document at
$0.75 per share 350,222 35 262,632 - - 262,667
Voluntary cancellation of shares
by shareholder, June 18, 1999 (1,000,000) (100) 100 - - -
- ----------------------------------------------------------------------------------------------------------------------------------
WTI balance, June 18, 1999, prior
to reorganization and stock
purchase by BC7 11,722,755 $ 2,015 $ 940,865 $ (328,086) $ 790 $ 615,584
==================================================================================================================================
BC7
==================================================================================================================================
BC7 balance, December 31, 1998 4,620,000 $ 32,900 $ 750 $ (31,796) $ - $ 1,854
Expenses paid by stockholder
on behalf of the Company - - 2,790 - - 2,790
Issued June 14, 1999 upon
5.804688 to 1 stock split 22,197,658 - - - - -
Voluntary cancellation of shares by
stockholders, June 18, 1999 (23,253,303) (28,527) 28,527 - - -
Increase in the book value of BC7's
stockholders' equity to 89% of WTI - (2,580) 805,303 (260,201) 703 543,225
- ----------------------------------------------------------------------------------------------------------------------------------
BC7 balance, June 18, 1999 prior to
reorganization and purchase of WTI
stock 3,564,355 1,793 837,370 (291,997) 703 547,869
Issued upon reorganization and
purchase of 89% WTI stock, recorded
at the book value of BC7's tangible
net assets 10,431,725 90 - - - 90
Issued October 6, 1999 for
services at $1.125 per share 45,000 50,625 - - - 50,625
Issued November 9, 1999
for services at $1.125 per share 5,000 5,625 - - - 5,625
Adjustment to record distribution of WFI's
shares of WTI to stockholders,
November 12, 1999 - - - 179,785 - 179,785
Loss - - - (793,190) - (793,190)
Foreign currency translation adjustment - - - - (1,526) (1,526)
- -----------------------------------------------------------------------------------------------------------------------------------
WFI balance, December 31, 1999 14,046,080 $ 58,133 $ 837,370 $ (905,402) $ (823) $ (10,722)
===================================================================================================================================
</TABLE>
Refer to note 1 a) for basis of reporting
See accompanying notes to financial statements.
F-4
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
<TABLE>
<CAPTION>
==========================================================================================================
From inception
(July 7, 1998) to
December 31, 1999 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in):
Operations
Net loss $ (1,121,276) $ (793,190) $ (328,086)
Items not involving cash:
Amortization 26,820 22,876 3,944
Services paid with share consideration 31,044 31,044 -
Minority interest (59,989) (59,989) -
Write off of goodwill on purchase of
shares held by minority stockholders 65,420 65,420 -
Changes in non-cash working capital:
Accounts receivable (2,701) 1,596 (4,297)
Prepaid expenses (34,200) (28,874) (5,326)
Accounts payable and accrued liabilities 63,636 47,620 16,016
-----------------------------------------------------------------------------------------------------
(1,031,246) (713,497) (317,749)
Financing
Advances (to) from related parties 66,909 67,487 (578)
Advances from shareholder 224,990 224,990 -
Issue of common shares for cash 942,880 262,667 680,213
Issue of common shares upon reorganization
and stock purchase 90 90 -
Adjustment to record distribution of WTI shares
to shareholders net of non-cash items (50,126) (50,126) -
Proceeds from long term debt net of
repayments 75,766 75,766 -
Purchase of shares held by minority
shareholders (73,146) (73,146) -
-----------------------------------------------------------------------------------------------------
1,187,363 507,728 679,635
Investments
Expenditures on capital assets (155,381) (108,363) (47,018)
Foreign currency translation adjustment (736) (1,526) 790
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash - (315,658) 315,658
Cash, beginning of period - 315,658 -
- ----------------------------------------------------------------------------------------------------------
Cash, end of period $ - $ - $ 315,658
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
================================================================================
Workfire.com, Inc. ("WFI" or the "Company") is a development stage company
and was incorporated under the name of Buffalo Capital VII, Ltd. ("BC7") on
September 19, 1997 under the laws of the state of Colorado. The Company
adopted the name, Workfire.com, Inc. effective June 18, 1999 and formally
changed its name from Buffalo Capital VII, Ltd. to Workfire.com, Inc. on
July 12, 1999. During 1999, the Company's principal business activity,
carried on through it's former subsidiary, Workfire.com (formerly Workfire
Technologies Inc.) ("WTI"), was the development of software to deliver
extended internet services to internet users. On November 12, 1999, the
Company distributed its shares of Workfire.com on a prorata basis to its
stockholders of record on that date and became a shell company with no
active operations.
1. SIGNIFICANT ACCOUNTING POLICIES:
a) Basis of reporting
These financial statements include the accounts of the Company as noted
below and the results of operations of its former wholly-owned
subsidiary, WTI, and WTI's wholly-owned subsidiaries, Workfire
Technologies International Inc. ("WTII") and Workfire Development
Corporation ("WDC"), to November 12, 1999.
Effective June 18, 1999, the Company acquired 89% of the outstanding
common shares of WTI. As WTI stockholders obtained control of the
Company through the exchange of their shares of WTI for shares of the
Company, the acquisition of WTI has been accounted for in these
financial statements as a reverse acquisition. On September 30, 1999,
pursuant to the General Corporation Laws of the State of Nevada, WTI
paid its dissenting stockholders represented by the residual 11%
minority share ownership, what it determined to be the fair value of
their shares, and subsequently cancelled the shares. On November 12,
1999, the Company distributed all of its shares of WTI on a prorata
basis to its stockholders of record on that date. Consequently, the
statements of loss and cash flows for the year ended December 31, 1999
reflect the results of operations and the cash flows of WTI, and its
wholly-owned subsidiaries, WTII and WDC, for the period from January 1,
1999 to November 12, 1999, combined with those of the legal parent,
WFI, from acquisition on June 18, 1999, in accordance with generally
accepted accounting principles for reverse acquisitions. The
comparative figures for the period from incorporation on July 7, 1998
to December 31, 1998 are those of the legal subsidiary, WTI.
In these notes to the financial statements, the Company, prior to the
business combination with WTI, is referred to as BC7, and after
completion of the business combination and name change, is referred to
as WFI.
b) Translation of financial statements
The Company's former subsidiary, Workfire Development Corporation,
operates in Canada and its operations are conducted in Canadian
currency.
F-6
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
b) Translation of financial statements (continued)
These statements are presented in United States currency for the
convenience of readers accustomed to United States currency. The method
of translation applied prior to the Company's distribution of its
ownership in WTI was as follows:
i) Monetary assets and liabilities were translated at the rate of
exchange in effect at the distribution date, being US $1.00 per
Cdn $1.462.
ii) Non-monetary assets and liabilities were translated at the
exchange rate in effect at the transaction date.
iii) Revenues and expenses were translated at the exchange rate in
effect at the transaction date.
iv) The net adjustment arising from the translation was recorded as a
separate component of stockholders' equity called "foreign
currency translation adjustment".
c) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
d) Financial instruments
The fair values of cash, accounts receivable and accounts payable and
accrued liabilities approximate their carrying values due to the
relatively short periods to maturity of these instruments. It is not
possible to determine the fair value of amounts due from/to related
parties as a maturity date is not determinable. The maximum credit risk
exposure for all financial assets is the carrying amount of that asset.
e) Amortization of capital assets
The capital assets of WTI were recorded at cost. Amortization was
provided using the following methods and annual rates:
=======================================================================
Asset Method Rate
-----------------------------------------------------------------------
Office equipment Declining balance 20%
Computer equipment Declining balance 30%
Computer software Declining balance 100%
Leasehold improvements Straight line 10%
-----------------------------------------------------------------------
Amortization was provided at one-half of the annual rates in the year
of acquisition.
F-7
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
f) Technology
Software development costs of WTI have been accounted for in accordance
with Statement of Financial Accounting Standards No. 86, ACCOUNTING FOR
THE COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED. Under the standard, capitalization of software development
costs begins upon the establishment of technological feasibility,
subject to net realizable value considerations. Technological
feasibility was not established at November 12, 1999 and therefore all
costs of acquiring, developing and enhancing the Workfire technology
were charged to earnings as incurred.
g) Loss per share
Loss per share has been calculated using the weighted average number of
common shares outstanding during the period. The full exercise of the
stock options referred to in note 4 is anti-dilutive and consequently
loss per share on a fully diluted basis has not been presented.
2. BUSINESS COMBINATIONS:
a) Effective June 18, 1999, BC7 and WTI executed a reorganization and
stock purchase agreement. BC7 issued 10,431,725 common shares to the
shareholders of WTI in consideration for 89% of the issued and
outstanding common shares of WTI on the basis of 1 common share of BC7
for each common share of WTI.
As the former shareholders of WTI obtained control of BC7 through the
share exchange, this transaction was accounted for in these financial
statements as a reverse acquisition and the purchase method of
accounting was applied. Under reverse acquisition accounting, WTI is
considered to have acquired BC7 with the results of BC7's operations
included in the financial statements from the date of acquisition. The
acquisition has been recorded at the tangible net asset value of BC7 at
the date of acquisition. The acquisition details are as follows:
Net assets acquired
Cash 1,310
Accounts payable (1,220)
-----------------------------------------------------------------------
90
=======================================================================
Consideration given for net assets acquired
10,431,725 Common shares issued 90
=======================================================================
As WTI is deemed to be the continuing entity, stockholders' equity of
WFI (formerly BC7) was increased by $543,225 as a result of accounting
for this combination as a reverse acquisition.
F-8
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
- --------------------------------------------------------------------------------
2. BUSINESS COMBINATIONS (CONTINUED):
b) Effective August 26, 1998, WTII and Tantallon Capital Inc.
("Tantallon") executed a business combination agreement. Tantallon
issued 10,800,000 common shares to the shareholders of WTII in
consideration for all of the issued and outstanding common shares of
WTII on the basis of 1.12 common shares of Tantallon for every common
share of WTII. As the former shareholders of WTII obtained control of
Tantallon through the share exchange, this transaction has been
accounted for in these financial statements as a reverse acquisition
and the purchase method of accounting has been applied. Under reverse
acquisition accounting, WTII is considered to have acquired Tantallon
with the results of Tantallon's operations included in the consolidated
financial statements from the date of acquisition. The acquisition has
been recorded at the net asset value of Tantallon at the date of
acquisition. The acquisition details are as follows:
Net assets acquired
Cash 10
=======================================================================
Consideration given for net assets acquired
10,800,000 Common shares issued 10
=======================================================================
Effective September 15, 1998, Tatallon merged with WTI with the
continuing company using the name Workfire.com.
The 1998 consolidated statements of loss, stockholders' equity and
comprehensive income and cash flows reflect the results of operations
and cash flows of WTII, the legal subsidiary, for the period from
incorporation of WTII on July 7, 1998 to December 31, 1998, combined
with those of WTI (formerly Tantallon) the legal parent, from August
26, 1998, being the effective date of the acquisition, to December 31,
1998.
3. DUE TO RELATED PARTY:
The amount due to related party is unsecured, non-interest bearing and
without stated terms of repayment.
4. CAPITAL STOCK:
a) Authorized:
100,000,000 common voting shares, without par value
10,000,000 non-voting preferred shares without par value
b) Stock option plan:
The Company has reserved 1,375,840 common shares for issuance to
officers and key employees pursuant to its Stock Option Plan. This
amount is to be adjusted annually to be the greater of 9% of the issued
common shares of the Company outstanding at the end of the immediately
preceding fiscal year, or 1,375,840. Unless the option agreement
executed by an optionee expressly otherwise provides, no portion of the
options can be exercised until at least three months after the grant
date (the "vesting date").
F-9
<PAGE>
WORKFIRE.COM, INC.
(A Development Stage Enterprise)
Notes to Financial Statements (continued)
$ United States
Year ended December 31, 1999 and period from incorporation on July 7, 1998 to
December 31, 1998
- --------------------------------------------------------------------------------
4. CAPITAL STOCK (CONTINUED):
b) Stock option plan (continued):
The following stock options were granted during the year ended December
31, 1999:
<TABLE>
<CAPTION>
==============================================================================================================================
Number Granted Exercised Expired Number Exercise
outstanding, during the during the during outstanding, price per
beginning of year year the year end of year share Expiry date Vesting date
year
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- 5,999 - - 5,999 $ 1.1875 September 7, 2004 December 7, 1999
- 84,375 - - 84,375 $2.93 June 19, 2009 September 19, 1999
- 74,000 - - 74,000 $2.93 June 19, 2009 June 19, 2000
- 74,000 - - 74,000 $2.93 June 19, 2009 June 19, 2001
- 74,000 - - 74,000 $2.93 June 19, 2009 June 19, 2002
- ------------------------------------------------------------------------------------------------------------------------------
- 312,374 - - 312,374
==============================================================================================================================
</TABLE>
The Company applies APB Opinion No. 25 in accounting for its stock
options and, accordingly, no compensation cost has been recognized for
its stock options in the financial statements. These stock options were
issued to officers and key employees of WTI. The Company distributed
its shares of WTI to its stockholders on November 12, 1999, and became
a shell company with no active or prospective operations. As a result
of the distribution of WTI stock on November 12, 1999, the stock
options were terminated effective February 12, 2000 pursuant to the
terms of the Company's stock option plan since the grantees were no
longer employees of the Company or its subsidiary. Accordingly, had the
Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net
loss for 1999 would not have required any adjustment.
5. THE YEAR 2000 ISSUE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. Although the change in date has
occurred, it is not possible to conclude that all aspects of the Year 2000
Issue that may affect the entity, including those related to customers,
suppliers, or other third parties, have been fully resolved.
F-10
<PAGE>
Exhibit 3.1
Articles of Incorporation, as amended
<PAGE>
BUFFALO CAPITAL VII, LTD.
ARTICLES OF AMENDMENT
BUFFALO CAPITAL VII, LTD., a Colorado corporation (hereinafter
referred to as the "Corporation"), hereby certifies to the Secretary
of State of the State of Colorado that:
FIRST: The name of the Corporation is BUFFALO CAPITAL VII, LTD.
SECOND: The Articles of Incorporation of the Corporation are
hereby amended by striking in their entirety the first article and
by substituting in lieu thereof the following:
"FIRST: The name of the corporation is Workfire.com, Inc."
THIRD: The amendment was advised to the stockholders by
written informal action, unanimously taken by the Board of Directors
of the Corporation, pursuant to and in accordance with Sections
7-108-202 and 7-110-103 of the Colorado Business Corporation Act on
June 4, 1999.
FOURTH: The amendment was adopted by the stockholders of the
Corporation at a special meeting held July 12, 1999. The number of
votes cast for the amendment by each voting group entitled to vote
separately on the amendment was sufficient for approval by that
voting group under the provisions of Section 7-110-103 of the
Colorado Business Corporation Act.
IN WITNESS WHEREOF, BUFFALO CAPITAL VII, LTD. has caused
these Articles of Amendment to be signed in its name and on its
behalf by its President, who acknowledges that these Articles of
Amendment are the act and deed of BUFFALO CAPITAL VII, LTD. and,
under the penalties of perjury, that the matters and facts set forth
herein with respect to authorization and approval are true in all
material respects to the best of the President's knowledge,
information, and belief.
BUFFALO CAPITAL VII, LTD.
By: /s/ Tom Taylor
-------------------------------------------
Tom Taylor, President
<PAGE>
WORKFIRE.COM, INC.
ARTICLES OF AMENDMENT
WORKFIRE.COM, INC., a Colorado corporation (hereinafter referred to
as the "Corporation"), hereby certifies to the Secretary of State of the State
of Colorado that:
FIRST: The name of the Corporation is WORKFIRE.COM, INC.
SECOND: The Articles of Incorporation of the Corporation
are hereby amended by striking in their entirety the first article
and by substituting in lieu thereof the following:
"FIRST: The name of the corporation is BCS Investment
Corporation."
THIRD: The amendment was advised to the stockholders by written
informal action, unanimously taken by the Board of Directors of the Corporation,
pursuant to and in accordance with Sections 7-108-202 and 7-110-103 of the
Colorado Business Corporation Act on January 3, 2000.
FOURTH: The amendment was adopted by the stockholders of the
Corporation at a special meeting held February 7, 2000. The number of votes cast
for the amendment by each voting group entitled to vote separately on the
amendment was sufficient for approval by that voting group under the provisions
of Section 7-110-103 of the Colorado Business Corporation Act.
IN WITNESS WHEREOF, WORKFIRE.COM, INC. has caused these Articles of
Amendment to be signed in its name and on its behalf by its President, who
acknowledges that these Articles of Amendment are the act and deed of
WORKFIRE.COM, INC. and, under the penalties of perjury, that the matters and
facts set forth herein with respect to authorization and approval are true in
all material respects to the best of the President's knowledge, information, and
belief.
WORKFIRE.COM, INC.
By: /s/ Nicholas Miller
---------------------------------------
Nicholas Miller, President
<PAGE>
Exhibit 4.4
1999 Stock Option Plan
<PAGE>
WORKFIRE.COM, INC.
1999 STOCK OPTION PLAN
1. PURPOSE; EFFECTIVENESS OF THE PLAN.
(a) The purpose of this Plan is to advance the interests of the
Company and its stockholders by helping the Company obtain and
retain the services of employees, officers, consultants, and
directors, upon whose judgment, initiative and efforts the
Company is substantially dependent, and to provide those persons
with further incentives to advance the interests of the Company.
(b) This Plan will become effective on the date of its adoption by the
Board provided the Plan is approved by the stockholders of the
Company (excluding holders of shares of Stock issued by the Company
pursuant to the exercise of options granted under this Plan) within
twelve months before or after that date. If the Plan is not so
approved by the stockholders of the Company any options granted under
this Plan will be rescinded and will be void. This Plan will remain
in effect until it is terminated by the Board or the Committee (as
defined hereafter) under section 9 hereof, except that no ISO (as
defined herein) will be granted after the tenth anniversary of the
date of this Plan's adoption by the Board. This Plan will be governed
by, and construed in accordance with, the laws of the State of
Colorado.
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the following defined terms (together
with other capitalized terms defined elsewhere in this Plan) will govern the
construction of this Plan, and of any stock option agreements entered into
pursuant to this Plan:
(a) "10% Stockholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions set
forth in Section 424(d) of the Code at the time he or she is granted
an Option, stock possessing more than ten percent (10%) of the total
combined voting power or value of all classes of stock of the Company
and/or of its subsidiaries;
(b) "1933 Act" means the federal Securities Act of 1933, as amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Called for under an Option," or words to similar effect, means
issuable pursuant to the exercise or an Option;
Page 1 of 12
Workfire.com, Inc. Stock Option Plan
<PAGE>
(e) "Code" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to refer to
Sections of the Code as enacted at the time of this Plan's adoption
by the Board and as subsequently amended, or to any substantially
similar successor provisions of the Code resulting from
recodification, renumbering or otherwise);
(f) "Committee" means a committee, known as the Compensation Committee,
of two or more Disinterested Directors, appointed by the Board, to
administer and interpret this Plan; provided that the term "Committee"
will refer to the Board during such times as no Committee is appointed
by the Board;
(g) "Company" means Workfire.com, Inc.
(h) "Disability" has the same meaning as "permanent and total disability,"
as defined in Section 22(e)(3) of the Code;
(i) "Disinterested Director" means a member of the Board who is not during
the period of one year prior to his or her service as an administrator
of the Plan, or during the period of such service, granted or awarded
Stock, options to acquire Stock, or similar equity securities of the
Company under this Plan or any similar plan of the Company, other than
the grant of a Formula Option pursuant to section 6(m) of this Plan;
(j) "Eligible Participants" means persons who, at a particular time,
are employees, officers, consultants, or directors of the Company or
its subsidiaries;
(k) "Fair Market Value" means, with respect to the Stock and as of the
date an ISO or a Formula Option is granted hereunder, the market price
per share of such Stock determined by the Committee, consistent with
the requirements of Section 422 of the Code and to the extent
consistent therewith, as follows:
(i) If the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value will be equal to the closing
price reported by the applicable composite-transactions report
for such date;
(ii) If the Stock was traded over-the-counter on the date in question
and was classified as a national market issue, then the Fair
Market Value will be equal to the last-transaction price quoted
by the NASDAQ system for such date;
(iii) If the Stock was traded over-the-counter on the date in question
but was not classified as a national market issue, then the Fair
Market Value will be equal to the average of the last reported
representative bid and asked prices quoted by the NASDAQ system
far such date; and
<PAGE>
(iv) If none of the foregoing provisions is applicable, then the
Fair Market Value will be determined by the Committee in good
faith on such basis as it deems appropriate.
(l) "Formula Option" means an NSO granted to members of the Committee
pursuant to section 6(m) hereof;
(m) "ISO" has the same meaning as "incentive stock option," as defined
in Section 422 of the Code;
(n) "Just Cause Termination" means a termination by the Company of an
Optionee's employment by and/or service to the Company (or if the
Optionee is a director, removal of the Optionee from the Board by
action of the stockholders or, if permitted by applicable law and the
bylaws of the Company, the other directors), in connection with the
good faith determination of the Company's board of directors (or of the
Company's stockholders if the Optionee is a director and the removal of
the Optionee from the Board is by action of the stockholders, but in
either case excluding the vote of the Optionee if he or she is a
director or a stockholder) that the Optionee has engaged in any acts
involving dishonesty or moral turpitude or in any acts that materially
and adversely affect the business, affairs or reputation of the Company
or its subsidiaries;
(o) "NSO" means any option granted under this Plan whether designated
by the Committee as a "non-qualified stock option, a "non-statutory
stock option" or otherwise, other than an option designated by the
Committee as an ISO, or any option so designated but which, for any
reason, fails to qualify as an ISO pursuant to Section 422 of the Code
and the rules and regulations thereunder;
(p) "Option" means an option granted pursuant to this Plan entitling
the option holder to acquire shares of Stock issued by the Company
pursuant to the valid exercise of the option;
(q) "Option Agreement" means an agreement between the Company and an
Optionee, in form and substance satisfactory to the Committee in its
sole discretion, consistent with this Plan;
(r) "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of the
Option Stock called for under such Option;
(s) "Option Stock" means Stock Issued or issuable by the Company
pursuant to the valid exercise of an Option;
<PAGE>
(t) "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a Transfer
authorized under this Plan;
(u) "Plan" means this 1999 Stock Option Plan of the Company;
(v) "QDRO" has the same meaning as "qualified domestic relations order"
as defined in Section 414(p} of the Code;
(w) "Stock" means shares of the Company's Common Stock, no par value;
(x) "Subsidiary" has the same meaning as "Subsidiary
Corporation" as defined in Section 424(f) of the Code;
(y) "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift,
attachment or levy of such Option Stock, including without limitation
an assignment for the benefit of creditors of the Optionee, a transfer
by operation of law, such as a transfer by will or under the laws of
descent and distribution, an execution of judgement against the Option
Stock or the acquisition of record or beneficial ownership thereof by a
lender or creditor, a transfer pursuant to a ODRO, or to any decree of
divorce, dissolution or separate maintenance, any property settlement,
any separation agreement or any other agreement with a spouse (except
for estate planning purposes) under which a part or all of the shares
of Option Stock are transferred or awarded to the spouse of the
Optionee or are required to be sold: or a transfer resulting from the
filing by the Optionee of a petition for relief, or the filing of an
involuntary petition against such Optionee, under the bankruptcy laws
of the United States or of any other nation.
3. ELIGIBILITY.
The Company may grant Options under this Plan only to persons who are Eligible
Participants as of the time of such grant. Subject to the provisions of sections
4(d), 5 and B hereof, there is no limitation on the number of Options that may
be granted to an Eligible Participant.
4. ADMINISTRATION.
(a) Committee. The Committee, if appointed by the Board, will administer
this Plan. If the Board, in its discretion, does not appoint such a
Committee, the Board itself will administer this Plan and take such
other actions as the Committee is authorized to take hereunder;
provided that the Board may take such actions hereunder in the same
manner as the Board may take other actions under the Company's
Articles of incorporation and bylaws generally.
<PAGE>
(b) Authority and Discretion of Committee. The Committee will have full
and final authority in its discretion, at any time and from time to
time, subject only to the express terms, conditions and other
provisions of the Company's Articles of incorporation, bylaws and
this Plan, and the specific limitations on such discretion set forth
herein:
(i) to select and approve the persons who will be granted Options
under this Plan from among the Eligible Participants, and to
grant to any person so selected one or more Options to purchase
such number of shares of Option Stock as the Committee may
determine;
(ii) to determine the period or periods of time during which
Options may be exercised, the Option Price and the duration of
such Options, and other matters to be determined by the Committee
in connection with specific Option grants and Options Agreements
as specified under this Plan;
(iii) to interpret this Plan, to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other
determinations necessary or advisable for the operation and
administration of this Plan; and
(iv) to delegate all or a portion of its authority under
subsections (i) and (ii) of this section 4(b) to one or more
directors of the Company who are executive officers of the
Company, but only in connection with Options granted to Eligible
Participants who are not subject to the reporting and liability
provisions of Section 16 of the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder, and subject
to such restrictions and limitations (such as the aggregate
number of shares of Option Stock called for by such Options that
may be granted) as the Committee may decide to impose on such
delegate directors.
(c) Limitation on Authority. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no authority:
(i) to grant Options to any of its members, whether or
not approved by the Board; and
(ii) to determine any matters, or exercise any discretion, in
connection with the Formula Options under section e(m) hereof, to
the extent that the power to make such determinations or to
exercise such discretion would cause one or more members of the
Committee no longer to be "Disinterested Directors" within the
meaning of section 2(i) above.
<PAGE>
(d) Designation of Options. Except as otherwise provided herein, the
Committee will designate any Option granted hereunder either as an ISO
or as an NSO. To the extent that the Fair Market Value (determined at
the time the Option is granted) of Stock with respect to which all
ISOs are exercisable for the first time by any individual during any
calendar year (pursuant to this Plan and all other plans of the
Company and/or its subsidiaries) exceeds $100,000, such option will
be treated as an NSO. Notwithstanding the general eligibility
provisions of section 3 hereof, the Committee may grant ISOs only to
persons who are employees of the Company and/or its subsidiaries.
(e) Option Agreements. Options will be deemed granted hereunder only
upon the execution and delivery of an Option Agreement by the Optionee
and a duly authorized officer of the Company. Options will not be
deemed granted hereunder merely upon the authorization of such grant
by the Committee.
5. SHARES RESERVED FOR OPTIONS.
(a) Option Pool. The aggregate number of shares of Option Stock that
may be issued pursuant to the exercise of Options granted under this
Plan initially will not exceed One Million Three Hundred and
Seventy-five Thousand Eight Hundred and Forty (1,375,840) (the "Option
Pool"), provided that such number automatically shall be adjusted
annually on the first day of the Company's fiscal year end to a number
equal to 9% of the number of shares of Stock of the Company
outstanding on the last day of the immediately preceding fiscal year,
or 1,375,840 shares, whichever is greater, and provided further that
such number will be increased by the number of shares of Option Stock
that the Company subsequently may reacquire through repurchase or
otherwise. Shares of Option Stock that would have been issuable
pursuant to Options, but that are no longer issuable because all or
part of those Options have terminated or expired, will be deemed not
to have been issued for purposes of computing the number of shares of
Option Stock remaining in the Option Pool and available for issuance.
(b) Adjustments Upon Changes In Stock. In the event of any change in
the outstanding Stock of the Company as a result of a stock split,
reverse stock split, stock dividend, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made
in:
(i) the aggregate number of shares of Option Stock in the Option
Pool that may be issued pursuant to the exercise of Options
granted hereunder;
(ii) the Option Price and the number of shares of Option Stock
called for in each outstanding Option granted hereunder; and
<PAGE>
(iii) other rights and matters determined on a per share basis
under this Plan or any Option Agreement hereunder. Any such
adjustments will be made only by the Board, and when so made will
be effective, conclusive and binding for all purposes with
respect to this Plan and all Options then outstanding. No such
adjustments will be required by reason of the issuance or sale
by the Company for cash or other consideration of additional
shares of its Stock or securities convertible into or
exchangeable for shares of its Stock.
6. TERMS OF STOCK OPTION AGREEMENTS.
Each Option granted pursuant to this Plan will be evidenced by an agreement (an
"Option Agreement") between the Company and the person to whom such Option is
granted, in form and substance satisfactory to the Committee in its sole
discretion, consistent with this Plan. Without limiting the foregoing, each
Option Agreement (unless otherwise slated therein) will be deemed to include the
following terms and conditions;
(a) Covenants of Optionee. At the discretion of the Committee, the
person to whom an Option is granted hereunder, as a condition to the
granting of the Option, must execute and deliver to the Company a
confidential information agreement approved by the Committee. Nothing
contained in this Plan, any Option Agreement or in any other agreement
executed in connection with the granting of an Option under this Plan
will confer upon any Optionee any right with respect to the
continuation of his or her status as an employee of, consultant or
independent contractor to, or director of, the Company or its
subsidiaries.
(b} Vesting Periods. Unless the Option Agreement executed by an
Optionee expressly otherwise provides and except as set forth herein,
the right to exercise an Option granted hereunder will be subject to
the following Vesting Periods, subject to the Optionee continuing to be
an Eligible Participant and the occurrence of any other event
(including the passage of time) that would result in the cancellation
or termination of the Option:
(i) no portion of the Option will be exercisable prior to the
expiration of three months after the date of grant set forth in
the Option Agreement; and
(ii) such additional vesting periods as may be determined by the
Committee in its sole discretion
(c) Exercise of the Option.
<PAGE>
(i) Mechanics and Notice. An Option may be exercised to the extent
exercisable (1) by giving written notice of exercise to the
Company, specifying the number of full shares of Option Stock to
be purchased and accompanied by full payment of the Option Price
thereof and the amount of withholding taxes pursuant to subsection
6(c)(ii) below; and (2) by giving assurances satisfactory to the
Company that the shares of Option Stock to be purchased upon such
exercise are being purchased for investment and not with a view to
resale in connection with any distribution of such shares in
violation of the 1933 Act; provided, however, that in the event
the Option Stock called for under the Option is registered under
the 1933 Act, or in the event resale of such Option Stock without
such registration would otherwise be permissible, this second
condition will be inoperative if, in the opinion of counsel for
the Company, such condition is not required under the 1933 Act, or
any other applicable law, regulation or rule of any governmental
agency.
(ii) Withholding Taxes. As a condition to the issuance of the shares
of Option Stock upon full or partial exercise of an NSO granted
under this Plan, the Optionee will pay to the Company in cash, or
in such other form as the Committee may determine in its
discretion, the amount of the Company's tax withholding liability
required in connection with such exercise. For purposes of this
subsection 6(c)(ii), "tax withholding liability" will mean all
federal and state income taxes, social security tax, and any other
taxes applicable to the compensation income arising from the
transaction required by applicable law to be withheld by the
Company.
(d) Payment at Option Price. Each Option Agreement will specify the
Option Price with respect to the exercise of Option Stock thereunder,
to be fixed by the Committee in its discretion, but in no event will
the Option Price for an ISO granted hereunder be less than the Fair
Market Value (or, in case the Optionee is a 10% Stockholder, one
hundred ten percent (110%) of such Fair Market Value) of the Option
Stock at the time such ISO is granted, and in no event will the Option
Price for an NSO granted hereunder be less than the 85% of Fair Market
Value. The Option Price will be payable to the Company in United States
dollars in cash or by check or, such other legal consideration as may
be approved by the Committee, in its discretion.
(i) For example, the Committee, in its discretion, may permit a
particular Optionee to pay all or a portion of the Option Price
and/or the tax withholding liability set forth in subsection
8(c)(ii) above, with respect to the exercise of an Option either
by surrendering shares of Stock already owned by such Optionee or
by withholding shares of Option Stock, provided that the Committee
determines that the fair market value of such surrendered Stock or
withheld Option Stock is equal to the corresponding portion of
such
<PAGE>
Option Price and/or tax withholding liability, as the case
may be, to be paid for therewith.
(ii) If the Committee permits an Optionee to pay any portion of
the Option Price and/or tax withholding liability with shares of
Stock with respect to the exercise of an Option (the "Underlying
Option") as provided in subsection 6(d)(i) above, then the
Committee, in its discretion, may grant to such Optionee (but only
if Optionee remains an Eligible Participant at that time)
additional NSOs, the number of shares of Option Stock called for
thereunder to be equal to all or a portion of the Stock so
surrendered or withheld (a "Replacement Option"). Each Replacement
Option will be evidenced by an Option Agreement. Unless otherwise
set forth therein, each Replacement Option will be immediately
exercisable upon such grant (without any Vesting Period) and will
be coterminous with the Underlying Option. The Committee, in its
sole discretion, may establish such other terms and conditions for
Replacement Options as it deems appropriate.
(e) Termination of the Option. Except as otherwise provided herein,
each Option Agreement will specify the period of time, to be fixed by
the Committee in its discretion, during which the Option granted
therein will be exercisable, not to exceed ten years from the date of
grant (the "Option Period"); provided that the Option Period will not
exceed five years from the date of grant in the case at an ISO granted
to a 10% Stockholder. To the extent not previously exercised, each
Option will terminate upon the expiration of the Option Period
specified in the Option Agreement; provided, however, that each such
Option will terminate, if earlier:
(i) three months after the date that the Optionee ceases to be an
Eligible Participant for any reason, other than by reason of death
or disability or a Just Cause Termination;
(ii) twelve months after the date that the Optionee ceases to be
an Eligible Participant by reason of such person's death or
disability; or
(iii) immediately as of the date that the Optionee ceases to be an
Eligible Participant by reason of a Just Cause Termination.
In the event of a sale of all or substantially all of the assets of the
Company, or a merger or consolidation or other reorganization in which
the Company is not the surviving corporation, or in which the Company
becomes a subsidiary of another corporation (any of the foregoing
events, a "Corporate Transaction"), then notwithstanding anything else
herein, the right to exercise all then outstanding Options will vest
immediately prior to such Corporate Transaction and will terminate
immediately after such Corporate Transaction; provided, however, that
if the Board, in its sole discretion, determines that such immediate
<PAGE>
vesting of the right to exercise outstanding Options is not in the best
interests of the Company, then the successor corporation must agree to
assume the outstanding Options or substitute therefor comparable
options of such successor corporation or a parent or subsidiary of such
successor corporation.
(f) Options Non transferable. No Option will be transferable by the
Optionee otherwise than by will or the laws of descent and distribution
or in the case of an NSO, pursuant to a QDRO. During the lifetime of
the Optionee, the Option will be exercisable only by him or her, or the
transferee of an NSO if it was transferred pursuant to a QDRO.
(g) Qualification of Stock. The right to exercise an Option will be
further subject to the requirement that if at any time the Board
determines, in its discretion, that the listing, registration or
qualification of the shares of Option Stock called for thereunder upon
any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory authority, is
necessary or desirable as a condition of or in connection with the
granting of such Option or the purchase of shares of Option Stock
thereunder, the Option may not be exercised, in whole or in part,
unless and until such listing, registration, qualification, consent or
approval is effected or obtained free of any conditions not acceptable
to the Board, in its discretion.
(h) Additional Restrictions on Transfer. By accepting Options and/or
Option Stock under this Plan, the Optionee will be deemed to represent,
warrant and agree as follows:
(i) Securities Act of 1933. The Optionee understands that the
shares of Option Stock have not been registered under the 1933
Act, and that such shares are not freely tradable and must be held
indefinitely unless such shares are either registered under the
1933 Act or an exemption from such registration is available. The
Optionee understands that the Company is under no obligation to
register the shares of Option Stock.
(ii) Other Applicable Laws. The Optionee further understands that
Transfer of the Option Stock requires full compliance with the
provisions of all applicable laws.
(iii) Investment Intent. Unless a registration statement is in effect
with respect to the sale of Option Stock obtained through exercise
of Options granted hereunder: (1) Upon exercise of any Option, the
Optionee will purchase the Option Stock for his or her own account
and not with a view to distribution within the meaning of the 1933
Act, other than as may be effected in compliance with the 1933 Act
and the rules and regulations promulgated thereunder; (2) no one
else will have any beneficial interest in the Option Stock; and
(3) he or she has no present intention of disposing of the Option
Stock at any particular time.
(i) Compliance with Law. Notwithstanding any other provision of this
Plan, Options may be granted pursuant to this Plan, and Option Stock
may be issued pursuant to the exercise thereof by an Optionee, only
after there has been compliance with all applicable federal and state
securities laws, and all of the same will be subject to this overriding
condition. The Company will not be required to register or qualify
Option Stock with the Securities and Exchange Commission or any State
agency, except that the Company will register with, or as required by
local law, file for and secure an exemption from such registration
requirements from, the applicable securities administrator and other
officials of each jurisdiction in which an Eligible Participant would
be granted an Option hereunder prior to such grant.
<PAGE>
(j) Stock Certificates. Certificates representing the Option Stock
issued pursuant to the exercise or Options will bear all legends
required by law and necessary to effectuate this Plan's provisions. The
Company may place a "stop transfer" order against shares of the Option
Stock until all restrictions and conditions set forth in this Plan and
in the legends referred to in this section 6(j) have been complied
with.
(k) Notices. Any notice to be given to the Company under the terms of
an Option Agreement will be addressed to the Company at its principal
executive office, Attention: Corporate Secretary, or at such other
address as the Company may designate in writing. Any notice to be given
to an Optionee will be addressed to the Optionee at the address
provided to the Company by the Optionee. Any such notice will be deemed
to have been duly given if and when enclosed in a properly sealed
envelope, addressed as aforesaid, registered and deposited, postage and
registry fee prepaid, in a post office or branch post office regularly
maintained.
(l) Other Provisions. The Option Agreement may contain such other
terms, provisions and conditions, including such special forfeiture
conditions, rights of repurchase, rights of first refusal and other
restrictions on Transfer of Option Stock issued upon exercise of any
Options granted hereunder, not inconsistent with this Plan, as may be
determined by the Committee in its sole discretion.
(m) Formula Options. No formula options are to be established at this
time.
7. PROCEEDS FROM SALE OF STOCK.
Cash proceeds from the sale of shares of Option Stock issued from time to time
upon the exercise of Options granted pursuant to this Plan will be added to the
general funds of the Company and as such will be used from time to time for
general corporate purposes.
<PAGE>
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of this Plan, and
except with respect to Formula Options, the Committee may modify, extend or
renew outstanding Options granted under this Plan, or accept the surrender of
outstanding Options (to the extent not theretofore exercised) and authorize the
granting of new Options in substitution therefor (to the extent not theretofore
exercised). Notwithstanding the foregoing, however, no modification of any
Option will, without the consent of the holder of the Option, alter or impair
any rights or obligations under any Option theretofore granted under this Plan.
9. AMENDMENT AND DISCONTINUANCE.
The Board or the Committee may amend, suspend or discontinue this Plan at any
time or from time to time; provided that no action of the Board or the Committee
will cause ISOs granted under this Plan not to comply with Section 422 of the
Code unless the Board or the Committee specifically declares such action to be
made for that purpose and provided further, that the provisions of section 6(m)
hereof may not be amended more often than once during any six (6) month period,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules and regulations thereunder. Moreover, no such action
may alter or impair any Option previously granted under this Plan without the
consent of the holder of such Option. The Board or the Committee may amend the
Plan without shareholder approval where such approval is not required to satisfy
any statutory or regulatory requirements.
10. PLAN COMPLIANCE WITH RULE L6B-3.
With respect to persons subject to Section 16 of the Securities Exchange Act of
1934, transactions under this plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the plan or action by the plan administrators fails so to comply,
it shall be deemed null and void, to the extent permitted by law and deemed
advisable by the plan administrators.
11. COPIES OF PLAN.
A copy of this Plan will be delivered to each Optionee at or before the time he
or she executes an Option Agreement.
***
Date Plan Adopted by Board of Directors: June 19, 1999
Date Plan Approved by Stockholders: _______________________________1999
<PAGE>
Exhibit 27
Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,206
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,206
<CURRENT-LIABILITIES> 13,893
<BONDS> 22,035
0
0
<COMMON> 58,133
<OTHER-SE> (68,032)
<TOTAL-LIABILITY-AND-EQUITY> (25,206)
<SALES> 0
<TOTAL-REVENUES> 8,847
<CGS> 0
<TOTAL-COSTS> 346,889
<OTHER-EXPENSES> 512,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,050
<INCOME-PRETAX> (850,945)
<INCOME-TAX> 2,234
<INCOME-CONTINUING> (853,179)
<DISCONTINUED> (59,989)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (793,190)
<EPS-BASIC> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
