As filed with the Securities and Exchange Commission on May __, 2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement
Under
THE SECURITIES ACT OF 1933
forestindustry.com, Inc.
--------------------------------
(Exact name of registrant as specified in charter)
Delaware 7372 98-0207081
---------------------- ---------- -------------
(State or other jurisdiction (Primary Standard Classi- (IRS Employer
of incorporation) fication Code Number) I.D. Number)
Suite 504 - 999 Canada Place
Vancouver, British Columbia V6C 3E1
604-632-3802
----------------
(Address and telephone number
of principal executive offices)
Suite 504 - 999 Canada Place
Vancouver, British Columbia V6C 3E1
604-632-3802
---------------
(Address of principal place of business or
intended principal place of business)
Joe Perraton
Suite 504 - 999 Canada Place
Vancouver, British Columbia V6C 3E1
604-632-3802
(Name, address and telephone number of agent for service)
Copies of all communications, including all communications sent
to the agent for service, should be sent to:
William T. Hart, Esq.
Hart & Trinen
1624 Washington Street
Denver, Colorado 80203
303-839-0061
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement
Page 1 of Pages
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each Proposed Proposed
Class of Maximum Maximum
Securities Securities Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Unit (1) Price Fee
- ---------- ---------- ---------- ------------- ---------
Common Stock (2) 486,721 $1.75 $851,762 $225
Common Stock (3) 1,875,000 $0.26 487,500 129
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Total 2,361,721 $1,339,226 $354
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(1) Offering price computed in accordance with Rule 457(c).
(2) Shares of common stock offered by certain selling shareholders.
(3) Represents maximum number of shares of common stock issuable upon conversion
of Series A preferred stock.
Pursuant to Rule 416, this Registration Statement includes such
indeterminate number of additional securities as may be required for issuance
upon the conversion of the Series A preferred stock as a result of any
adjustment in the number of securities issuable by reason of the anti-dilution
provisions of the Series A preferred stock.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of l933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
forestindustry.com, Inc.
Common Stock
By means of this prospectus certain shareholders of forestindustry.com are
offering to sell up to 772,981 shares of our common stock, which amount includes
shares of common stock which may be issuable upon conversion of our Series A
preferred stock. The actual number of shares issuable upon the conversion of our
Series A preferred shares will vary depending upon the price of our common stock
on the date the preferred shares are converted into common stock. However, based
upon the market price of our common stock as of May 15, 2000, which was $1.75
per share, we would be required to issue 286,260 shares of our common stock upon
the conversion of the Series A preferred stock.
We will not receive any proceeds form the resale of shares of common stock
by the selling stockholders. We will pay for the expenses of this offering.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"FXCH." On May 15, 2000 the closing bid price for one share of common stock was
$1.75. Our Series A preferred shares are not quoted or traded on any exchange or
quotation system.
All dollar amounts refer to US dollars unless otherwise indicated.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these Securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
These securities are speculative and involve a high degree of risk. For a
description of certain important factors that should be considered by
prospective investors, see "Risk Factors" beginning on page 6 of this prospectus
The date of this prospectus is May ___, 2000
<PAGE>
PROSPECTUS SUMMARY
Our Business
We have developed an internet website for the forest and wood products
industry. Our internet site provides a directory of companies associated with
the forest and wood industry. Our website is divided into three categories:
Forest and Logging, Wood Processing and Logs, Lumber and Wood Products.
Companies may advertise their services on the site and exchange information
through our online discussion forums. Our website includes The World Wood
Exchange which allows manufacturers, buyers and intermediaries to list all types
of wood products for purchase and sale through the website. The website also
provides information on industry related trade shows, conferences and news
items. All updates and changes made to the website are completed by our in-house
technical staff. We generate revenues from this web site by charging a monthly
fee to customers based on the size of the advertisement and services offered.
To date, approximately 60% of revenues have been generated from our
website and the other 40% through internet related services.
The internet related services which we provide are essentially all
services which a business needs to promote itself and to advertise and/or sell
its products and services through the internet, including the design,
development and hosting of websites for our customers.
We charge either a monthly fee for these services or a fee based upon the
number of hours involved in the project. All of our services can be customized
to the specific needs of our customers.
Our website address is forestindustry.com.
We are a Delaware corporation and our corporate offices are located at
Suite 504, 999 Canada Place, Vancouver, British Columbia V6C 3E1. Our telephone
number is 604-632-3802. We have one wholly-owned subsidiary, The Forest Industry
Online, Inc. which maintains business offices at #6, 2150 Bowen Road. Nanaimo
British Columbia V9S 1H7. We currently employ 23 people on a full-time basis.
The Offering
This prospectus relates to the sale of:
o 486,721 shares of common stock offered by certain of our stockholders.
o 286,260 shares of our common stock which shares are issuable upon the
conversion of our Series A preferred stock; and
<PAGE>
The owners of the 486,721 shares of our common stock, as well as the
holders of our Series A preferred stock, to the extent they convert their Series
A preferred shares into shares of our common stock, are referred to in this
prospectus as the selling stockholders. We will not receive any funds upon the
conversion of the Series A preferred stock since we received $750,000 upon the
sale of these shares. We will not receive any proceeds from the sale of the
common stock by the selling stockholders.
As of May 15, 2000, we had 12,966,521 shares of common stock issued and
outstanding. Assuming all Series A preferred shares are converted into shares of
common stock based upon the market price of our common stock at May 15, 2000, we
will have 13,252,781 issued and outstanding shares of common stock. See
"Dilution and Comparative Share Data".
Summary Financial Data
The following summary financial data is limited to the operating results
of our wholly owned subsidiary The Forest Industry Online Inc. which we acquired
on January 31, 2000. Prior to the acquisition of The Forest Industry Online Inc.
we had not generated any revenue and had not commenced any operations other than
initial corporate formation and capitalization.
The financial data presented below should be read in conjunction with the
more detailed financial statements and related notes which are included
elsewhere in this prospectus along with the section entitled "Management's
Discussion and Analysis and Plan of Operations."
Results of Operations:
Year ended July 31, Nine Months Ended
1999 February 29, 2000
---------------- ------------------
Sales $300,362 $ 264,144
Operating Expenses (300,903) (371,732)
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Net Income (Loss) $ (541) $(107,588)
============ ==========
Balance Sheet Data:
July 31, 1999 February 29, 2000
Current Assets $69,437 $602,114
Total Assets 101,918 661,110
Current Liabilities 228,532 119,033
Working Capital (Deficit) (159,095) 483,081
Stockholders' Equity (Deficit) (126,614) 542,077
<PAGE>
Forward Looking Statements
This prospectus contains various forward-looking statements that are based on
our beliefs as well as assumptions made by and information currently available
to us. When used in this prospectus, the words "believe", "expect",
"anticipate", "estimate" and similar expressions are intended to identify
forward-looking statements. Such statements may include statements regarding
seeking business opportunities, payment of operating expenses, and the like, and
are subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from our projections or estimates. Factors
which could cause actual results to differ materially are discussed at length
under the heading "Risk Factors". Should one or more of the enumerated risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. Investors should not place undue reliance on forward-looking
statements, all of which speak only as of the date made.
RISK FACTORS
An investment in our securities involves substantial risks. Prospective
investors should carefully consider the following risk factors prior to making
an investment.
We Anticipate We Will Incur Continued Losses For The Foreseeable Future
To date, we have not been profitable. We may never be profitable or, if we
become profitable, we may be unable to sustain profitability. We expect to incur
significant losses for the foreseeable future. Our revenues may not grow or may
not even continue at their current level.
We currently rely on revenues generated from the sale of advertising for
substantially all of our revenues. If we do not continue to develop advertising
or other sources of revenues our business may be materially adversely affected.
Other factors could also affect our revenues. For example, widespread use
of "filter" software programs that limit access to storefront advertising from
the internet user's browser could reduce advertising on the internet, which
would materially adversely affect our business, financial condition and
operating results. We do not have any contracts or agreements with our customers
and therefore no guarantee of ongoing future revenues.
If we do not generate revenue from our proposed Lumber and Equipment
Exchange, our business, financial condition and operating results could be
materially adversely affected. To establish our proposed Lumber and Equipment
Exchange we will have to license from a third party the sophisticated computer
software systems needed to operate an internet-based auction site. As of May 15,
2000 we had not obtained any license for the computer programs which will be
required for the Lumber and Equipment Exchange.
<PAGE>
We Expect Our Operating Expenses To Increase
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenues do not increase, we may
not be able to compensate by reducing expenses in a timely manner. In addition,
we plan to significantly increase our operating expenses to:
o establish an on-line internet website for the auction of lumber, wood
products and related equipment;
o increase our sales and marketing operations;
o broaden our customer support capabilities; and
o pursue marketing and distribution agreements.
We Do Not Have Sufficient Capital to Implement Our Growth Strategy.
This offering is being made by certain of our shareholders. We will not
receive any funds from the sale of our stock by these shareholders. During the
twelve months ending April 30, 2001, we expect that we will spend approximately
$1,550,000 in order to expand our business. To fund these expenditures we will
require substantial additional capital. Although we will attempt to raise the
capital needed for the expansion of business through the sale of our capital
stock or debt financing, no one has made any commitment to provide us with any
capital and there can be no assurance that we will be able to obtain the
additional capital which we need or, even if such capital is obtained that our
expansion plans will be successful.
Adoption Of The Internet As An Advertising Medium Is Uncertain
The growth of internet advertising requires validation of the internet as
an effective advertising medium. This validation has yet to fully occur.
Acceptance of the internet among advertisers will also depend on growth in the
commercial use of the internet. If widespread commercial use of the internet
does not develop, or if the internet does not develop as an effective and
measurable medium for advertising, our business, financial condition and
operating results could be materially adversely affected.
No standards have been widely accepted to measure the effectiveness of
internet advertising. If such standards do not develop, existing advertisers may
not continue their current levels of internet advertising and advertisers who
are not currently advertising on the internet may be reluctant to do so. Our
business, financial condition and operating results would be adversely affected
if the market for internet advertising fails to develop or develops slower than
expected.
<PAGE>
Our Long-Term Success Depends On The Development Of The Electronic Commerce
Market, Which Is Uncertain
Electronic commerce, or e-commerce, refers to the purchase of products or
services advertised on an internet website. If electronic commerce does not grow
or grows slower than expected, our business will suffer. Our long-term success
depends on acceptance of electronic commerce within the forest industry.
A number of factors could prevent such acceptance, including the
following:
o electronic commerce is at an early stage and buyers may be unwilling to
shift their purchasing from traditional vendors to online vendors;
o the necessary network infrastructure for substantial growth in usage of the
internet may not develop in an adequate fasion;
o government regulation or taxation may adversely affect electronic commerce;
o insufficient telecommunication services or changes in telecommunication
services could result in slower response times; and
o adverse publicity and consumer concern about the security of electronic
commerce transactions could discourage its acceptance and growth.
There Is Intense Competition For Advertising And Customers
Competition for internet advertising and customers is intense. We expect
that competition will continue to intensify. Barriers to entry are minimal, and
competitors can launch new web sites at a relatively low cost. We compete for a
share of a customer's advertising budget with online services and traditional
off-line media, such as print and trade associations. Although to date we
believe there are no internet companies with a larger number of forest industry
specific clients, several companies offer competitive websites.
Our competitors may develop internet services that are superior to, or
have greater market acceptance than, our services. If we are unable to compete
successfully against our competitors, our business, financial condition and
operating results will be adversely affected.
Many of our competitors have greater brand recognition and greater
financial, marketing and other resources than ours. This may place us at a
disadvantage in responding to our competitors' pricing strategies, technological
advances, advertising campaigns, strategic partnerships and other initiatives.
<PAGE>
Concerns Regarding Security Of Transactions And Transmitting Confidential
Information Over The Internet May Negatively Impact Our Electronic Commerce
Business
We believe that concern regarding the security of confidential information
transmitted over the internet, such as credit card numbers, prevents many
potential customers from using the internet to buy or sell products or services.
Although our system has security features to protect the privacy and
integrity of customer data, such as password requirements, our website is
potentially vulnerable to physical or electronic break-ins, viruses or similar
problems. If a person circumvents our security measures, he or she could
misappropriate proprietary information or cause interruptions in our operations.
Security breaches that result in access to confidential information could damage
our reputation and expose us to a risk of loss or liability. We may be required
to make significant investments and efforts to protect against or remedy
security breaches. Additionally, as electronic commerce becomes more prevalent
(and consequently becomes the focus of our development of direct marketing
products), our customers will become more concerned about security. If we do not
adequately address these concerns, this could materially adversely affect our
business, financial condition and operating results.
Our Business Depends On The Growth Of The Internet, Which Is Uncertain
Our market is new and rapidly evolving. Our business would be adversely
affected if internet usage does not continue to grow. Internet usage may be
inhibited by a number of reasons, such as:
o infrastructure;
o security concerns;
o inconsistent quality of service; and
o lack of availability of cost-effective, high-speed service.
If internet usage grows, the internet infrastructure may not be able to
support the demands placed on it by this growth or its performance or
reliability may decline. In addition, web sites may from time to time experience
interruptions in their service as a result of outages and other delays occurring
throughout the internet network infrastructure. If these outages or delays
frequently occur in the future, internet usage, as well as usage of our proposed
Lumber and Equipment Exchange, could be adversely affected.
Our Internet Content May Not Attract Users With Demographic Characteristics
Valuable To Our Advertisers
Our future success depends upon our ability to deliver internet content
about the forest industry that will attract users with demographic
characteristics valuable to our advertising customers. If we are unable to
develop internet content that attracts a loyal user base possessing demographic
<PAGE>
characteristics attractive to advertisers, it could have a material adverse
effect on our business, financial condition and operating results. Internet
users can freely navigate and instantly switch among a large number of web
sites. Many of these internet sites offer original content. Thus, it may be
difficult for us to distinguish our content and attract users.
Our Advertising Revenues Could Decrease If We Do Not Develop The
"forestindustry.com" Brand And Our Proposed Lumber and Equipment Exchange
To be successful, we must establish and strengthen awareness of the
"forestindustry.com" brand as well as the brands associated with our proposed
Lumber and Equipment Exchange. If our brand awareness is weakened, it could
decrease the attractiveness of our audiences to advertisers, which could result
in decreasing advertising revenues. We believe that brand recognition will
become more important in the future with the growing number of internet sites.
Our brand awareness could be diluted, which could adversely affect our business,
financial condition and operating results if users do not perceive our products
and services to be of high quality.
We Are Growing Rapidly And Effectively Managing Our Growth May Be Difficult
We have grown and expect to continue to grow rapidly both by adding new
services and hiring new employees. This growth is likely to place a significant
strain on our resources and systems. To manage our growth, we must develop and
implement effective systems and train and manage our employees to perform all of
the functions necessary to effectively develop, service and manage our
subscriber base and business. If we are unable to effectively manage this rapid
growth, we may not achieve increased profits from operations in the time frame
we anticipated.
Many of our employees have only recently joined us. Of our 23 present
employees, 17 have worked for us less than one year. We cannot assure you that
our management will be able to effectively or successfully manage our growth.
We May Not Be Able To Protect Our Proprietary Rights And We May Infringe The
Proprietary Rights Of Others
Proprietary rights are important to our success and our competitive
position. We have not applied for any trademarks, though we intend to do so in
the future. There is no guarantee that our applications will be accepted.
Although we seek to protect our proprietary rights, our actions may be
inadequate to protect any trademarks and other proprietary rights or to prevent
others from claiming violations of their trademarks and other proprietary
rights. In addition, effective trademark protection may be unenforceable or
limited in certain countries. Our business is based on the utilization of
existing available computer technologies. Consequently, other competitors could
copy our systems and services.
<PAGE>
We May Not Be Able To Acquire Or Maintain Easily Identifiable Web Addresses Or
Prevent Third Parties From Acquiring Web Addresses Similar To Ours
We currently hold various internet web addresses relating to our brand.
These web addresses include forestindustry.com, forestindustry.net,
logsandlumber.com and other web addresses. We may not be able to prevent third
parties from acquiring web addresses that are similar to our addresses, which
could materially adversely affect our business, financial condition and
operating results. The acquisition and maintenance of web addresses generally is
regulated by governmental agencies and their designees. The regulation of web
addresses in the United States and in foreign countries is subject to change. As
a result, we may not be able to acquire or maintain relevant web addresses in
all countries where we conduct business. Furthermore, the relationship between
regulations governing such addresses and laws protecting trademarks is unclear.
We May Be Subject To Legal Liability For Publishing Or Distributing Content Over
The Internet
We may be subject to legal claims relating to the content in our vertical
trade communities, or the downloading and distribution of such content. Claims
could involve matters such as defamation, invasion of privacy, and copyright
infringement. Providers of internet products and services have been sued in the
past, sometimes successfully, based on the content of material. In addition,
some of the content proposed to be provided on our Lumber and Equipment Exchange
may be drawn from data compiled by other parties, including governmental and
commercial sources, and we would then re-key the data. This data may have
errors. If our content is improperly used or if we supply incorrect information,
it could result in unexpected liability. Our insurance may not cover claims of
this type, or may not provide sufficient coverage. Our business, financial
condition and operating results could suffer a material adverse effect if costs
resulting from these claims are not covered by our insurance or exceed our
coverage.
Risk Of Failure Of Our Computer And Communications Hardware Systems Increases
Without Back-Up Facilities
Our business depends on the efficient and uninterrupted operation of our
computer and communications hardware systems. Any system interruptions that
cause our website to be unavailable to web browsers may reduce our
attractiveness to advertisers and could materially adversely affect our
business, financial condition and operating results. We maintain most of our
computer systems in our facility in Nanaimo, British Columbia. Although we have
back-up facilities for our computer systems, we rely on one provider for our
telecommunication lines. If the telecom provider failed to provide service to
our systems, we would be unable to provide service. Interruptions could result
from natural disasters as well as power loss, telecommunications failure and
similar events.
<PAGE>
Capacity Limits On Our Technology, Transaction Processing System And Network
Hardware And Software May Be Difficult To Project And We May Not Be Able To
Expand And Upgrade Our Systems To Meet Increased Use
If traffic on our website increases, we must expand and upgrade our
technology, transaction processing systems and network hardware and software. We
may not be able to accurately project the rate of increase in traffic on our
website. In addition, we may not be able to expand and upgrade our systems and
network hardware and software capabilities to accommodate these increases. If we
do not appropriately upgrade our systems and network hardware and software, our
business, financial condition and operating results will be materially adversely
affected.
We May Not Be Able To Adjust To Technological Changes In A Cost-Effective Manner
Our industry is characterized by rapid technological change and frequent
new product announcements. Significant technological changes could render our
website and proposed Lumber and Equipment Exchange obsolete. If we are unable to
successfully respond to these developments or do not respond in a cost-effective
way, our business, financial condition and operating results will be materially
adversely affected. To be successful, we must adapt to our rapidly changing
market by continually improving the responsiveness, services and features of our
website and by developing new features to meet customer needs. Our success will
depend, in part, on our ability to license leading technologies useful in our
business, enhance our existing services and develop new services and technology
that address the needs of our customers. We will also need to respond to
technological advances and emerging industry standards in a cost-effective and
timely basis.
Our Success Is Dependent On Our Key Personnel Who We May Not Be Able To Retain
And We May Not Be Able To Hire Enough Additional Personnel To Meet Our Needs
We believe that our success will depend on continued employment of our
management team and key technical personnel. If one or more members of our
management team were unable or unwilling to continue in their present positions,
our business, financial condition and operating results could be materially
adversely affected. While we have employment agreements with certain members of
our management, others are not subject to formal agreements. We do not carry key
person life insurance on any members of our management.
Our success also depends on having a highly trained sales force and
telesales group. We will need to continue to hire additional personnel as our
business grows. A shortage in the number of trained salespeople could limit our
ability to increase sales.
We plan to expand our employee base to manage our anticipated growth.
Competition for personnel, particularly for employees with technical expertise,
is intense. Our business, financial condition and operating results will be
materially adversely affected if we cannot hire and retain suitable personnel.
<PAGE>
The Price of Our Common Stock Price Is Likely To Be Highly Volatile
The market price of our common stock is likely to be highly volatile as
the stock market in general, and the market for internet-related and technology
companies in particular, has been highly volatile. Investors may not be able to
resell their shares of our common stock following periods of volatility because
of the market's adverse reaction to such volatility. The trading prices of many
technology and internet-related companies' stocks have reached historical highs
within the last 52 weeks and have reflected relative valuations substantially
above historical levels. During the same period, such companies' stocks have
also been highly volatile and have recorded lows well below such historical
highs. We cannot assure you that our stock will trade at the same levels of
other internet stocks or that internet stocks in general will sustain their
current market prices.
Factors that could cause such volatility may include, among other things:
o actual or anticipated variations in quarterly operating results;
o announcements of technological innovations;
o new sales formats or new products or services;
o conditions or trends in the internet industry;
o changes in the market valuations of other internet companies;
o announcements by us or our competitors of significant acquisitions,
strategic partnerships or joint ventures;
o capital commitments;
o additions or departures of key personnel; and
o sales of common stock.
In addition to the foregoing, if our stockholders sell substantial amounts
of our common stock in the public market as a result of or following this
offering, the market price of our common stock may fall.
Many of these factors are beyond our control. These factors may materially
adversely affect the market price of our common stock, regardless of our
operating performance.
There is only a limited market for our common stock, and there is no assurance
that such a market will continue.
Our common stock began trading in March 2000 and accordingly has little if
any trading history. We cannot predict the extent to which a trading market will
develop or how liquid that market might become.
Trades of our common stock are presently subject to Rule 15g-9 of the
Securities and Exchange Commission, which rule imposes certain requirements on
broker-dealers who sell securities subject to the rule to persons other than
established customers and accredited investors. For transactions covered by the
rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The Securities and Exchange Commission also has
<PAGE>
rules that regulate broker-dealer practices in connection with transactions in
"penny stocks". Penny stocks generally 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, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). 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 prepared by the Commission 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. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. These disclosure requirements have the effect
of reducing the level of trading activity in the secondary market for our common
stock. As a result of the foregoing, investors in this offering may find it more
difficult to sell their shares of our common stock.
DILUTION AND COMPARATIVE SHARE DATA
As of May 15, 2000, our present stockholders owned 12,966,521 shares of
common stock. The following table illustrates the comparative stock ownership of
our present stockholders, as compared to the investors in this offering,
assuming all shares offered are sold. All historical share data in this
prospectus has been adjusted to reflect the various recapitalizations of our
common stock. See "Description of Securities" for a complete history of the
recapitalizations of our common stock.
Number of Shares Note
of Common Stock Reference
Shares OF COMMON STOCK offered by this prospectus:
Shares of common stock issuable upon 286,260 A
conversion of Series A preferred
stock, assuming conversion price of $1.31
per share
Shares of common stock offered by 486,721 B
selling stockholders
Shares of common stock outstanding 12,966,521
as of May 15, 2000
<PAGE>
Shares of common stock which will be 13,252,781
outstanding, assuming conversion of all
shares of Series A preferred stock (1)
Pro forma net tangible book value per $0.03
share of common stock as of
February 29, 2000 (2)
Percentage of our common stock represented 5.8% by shares offered by this
prospectus, assuming conversion of all shares of Series A preferred stock listed
above
(1) Amount excludes 486,721 shares of common stock offered by existing
stockholders.
(2) Assumes conversion of all Series A preferred shares into 286,260 shares of
common stock.
"Net tangible book value" is the amount that results from subtracting our
total liabilities and intangible assets from our total assets. Tangible assets
exclude goodwill. The purchasers of the shares of common stock offered by this
prospectus will suffer dilution in their investment if the price paid for the
shares offered by this prospectus is greater than the net tangible book value of
our common stock at the time of such purchase.
Other Shares Which May Be Issued:
- --------------------------------
The following table lists additional shares of our common stock which may
be issued as a result of the exercise of outstanding options, warrants or other
securities issued by us:
Number of Shares of Note
Common Stock Reference
Shares issuable on exercise of 31,000 C
options granted to our employees
Notes
A. In January 2000 we sold 750 shares of our Series A preferred stock for
$750,000. Each Series A preferred share may be converted, at the option of
the holder, into shares of our common stock equal in number to the amount
determined by dividing $1,000 by the conversion price, which is 75% of the
average closing bid price of our common stock for the ten trading days
preceding the conversion date. However, the terms of the Series A preferred
stock provide that no more than 5,000 shares and no less than 250 shares of
common stock may be issued upon the conversion of any Series A preferred
share. In addition, all of the Series A preferred shares will automatically
convert into shares of common stock on January 31, 2001 at the conversion
price then in effect. In May 2000 Ascent Financial, Inc. converted 375
Series A preferred shares into 249,221 shares of common stock. The actual
number of shares to be issued upon the conversion of the Series A preferred
stock may be greater than 286,260 shares and will depend upon the price of
our common stock at the time of conversion.
B. Shares are being offered by certain of our existing stockholders.
C. See "Executive Compensation - Stock Option Plan" for information concerning
these options.
The shares referred to in notes A and B above are being offered for sale to
the public by means of this prospectus. See "Selling Stockholders".
MARKET FOR OUR COMMON STOCK
As of May 15, 2000, we had 12,966,521 shares of common stock outstanding
and approximately 54 stockholders of record. We believe the number of beneficial
owners may be greater due to shares held by brokers, banks, and others for the
benefit of their customers. Since December 1999 our common stock has been quoted
on the National Association of Securities Dealers OTC Bulletin Board, but a
trading market only developed on March 1, 2000. Set forth below are the range of
high and low bid quotations for the periods indicated as reported by the NASD.
The market quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions and may not represent actual transactions.
<PAGE>
Common Stock
Month Ended High Low
January 31, 2000 -- --
February 29, 2000 -- --
March 31, 2000 $8.50 $6.00
April 30, 2000 $2.87 $2.00
The provisions in our Articles of Incorporation relating to our preferred
stock would allow our directors to issue preferred stock with rights to multiple
votes per share and dividends rights which would have priority over any
dividends paid with respect to our common stock. The issuance of preferred stock
with such rights may make the removal of management difficult even if such
removal would be considered beneficial to stockholders generally, and will have
the effect of limiting Stockholder participation in certain transactions such as
mergers or tender offers if such transactions are not favored by incumbent
management.
Holders of our common stock are entitled to receive such dividends as may
be declared by our board of directors and, in the event of liquidation, to share
pro rata in any distribution of our assets after payment of liabilities. Our
board of directors is not obligated to declare a dividend. We have not paid any
dividends on our common stock and we do not have any current plans to pay any
common stock dividends.
Management's discussion and Analysis
AND plan of operationS
On January 31, 2000 we acquired 100% of The Forest Industry Online, Inc.
Following the transaction, the shareholders of The Forest Industry Online, Inc.
owned a majority of our outstanding shares of common stock. Accordingly, for
financial reporting purposes the transaction was accounted for as a reverse
acquisition with The Forest Industry Online, Inc. considered the accounting
acquirer. (See Note 2(a) to the February 29, 2000 financial statements of
forestindustry.com, Inc.). As such, The Forest Industry Online, Inc.'s
historical financial statements are now reported as our financial statements.
The following selected financial data and related discussion is limited to the
operating results of our wholly owned subsidiary The Forest Industry Online Inc.
which we acquired on January 31, 2000. Prior to the acquisition of The Forest
Industry Online Inc. we had not generated any revenue and had not commenced any
operations other than initial corporate formation and capitalization.
<PAGE>
Results of Operations:
Year ended July 31, Nine Months Ended
1999 February 29, 2000
---------------- ------------------
Sales $300,362 $ 264,144
Operating Expenses (300,903) (371,732)
--------- ---------
Net Income (Loss) $ (541) $(107,588)
============ ==========
Balance Sheet Data:
July 31, 1999 February 29, 2000
Current Assets $69,437 $602,114
Total Assets 101,918 661,110
Current Liabilities 228,532 119,033
Working Capital (Deficit) (159,095) 483,081
Stockholders' Equity (Deficit) (126,614) 542,077
We have not declared any common stock dividends since our inception.
Year Ending July 31, 1999
Revenues during the year increased by 134% over the prior period as we
added customers to our website. Expenses during the year increased by 48% from
the twelve months ending July 31, 1998 due to the addition of customer service
and technical support personnel who were required due to our higher level of
activity.
Nine Months Ending February 29, 2000
During the nine months ending February 29, 2000 revenues increased by 48%
over the prior period as we added more customers to our website. However during
this same period expenses increased by 125% over the nine months ended February
29, 1999 resulting in a loss of $(107,588). The increase in expenses was the
result of an expanded advertising and marketing program and the addition of
customer service and technical support personnel who were required due to our
higher level of activity.
Liquidity and Capital Resources
During the year ended July 31, 1999 our sources and use of cash were:
Cash provided by operations $13,274
Amounts borrowed from a bank 55,695
<PAGE>
Amounts borrowed from shareholders 17,672
Loans repaid to Teaco Properties Ltd.
(a principal shareholder) (72,714)
Purchase of equipment (27,009)
Other (166)
------------
Net decrease in cash during the year $(13,248)
=========
During the nine months ending February 29, 2000 our sources and use of
cash were:
Cash provided by operations $(53,478)
Payment of long term debt and bank
credit line (60,860)
Loans repaid to Teaco Properties Ltd.
(a principal shareholder) (71,229)
Loans repaid to other shareholders (12,463)
Proceeds from sale of preferred stock 750,000
Purchase of equipment (37,712)
-----------
Net increase in cash during the period $514,258
========
During the twelve months ending April 30, 2001 we anticipate that we will
need capital for the following purposes:
Fund operating losses: $1,000,000
Sales and marketing: 100,000
Expansion of internet services: 150,000
Establishment of our Lumber and
Equipment Exchange: 300,000
-----------
$1,550,000
We expect our expenses will continue to increase during the next twelve
months as a result of increased marketing expenses and the expansion of our
online services.
We plan to develop the Lumber and Equipment Exchange, or LEE, which will
conduct auctions of lumber, equipment and other wood products by means of the
internet. To establish the Lumber and Equipment Exchange we will need to license
from a third party the sophisticated computer software systems needed to operate
<PAGE>
an internet-based auction site. We will earn commissions on any sales made
through the LEE. We anticipate that the LEE will be operational by September
2000.
We expect that we can obtain a license for the computer system needed for
the LEE for approximately $300,000. In the alternative, we may attempt to
establish a joint venture or similar arrangement with a company which has the
rights to such a computer system, in which case the initial cost of the license
would be less but we would be required to share any revenues we earn from the
LEE with our joint venture partner. As of May 15, 2000 we had not obtained any
license for the computer programs which will be required for our Lumber and
Equipment Exchange.
As of February 29, 2000 we had working capital of approximately $483,000.
We anticipate obtaining the additional capital which we will require through
revenues from our operations and through a combination of debt and equity
financing. There is no assurance that we will be able to obtain capital we will
need or that our estimates of our capital requirements will prove to be
accurate. As of the date of this prospectus we did not have any commitments from
any source to provide additional capital.
BUSINESS
General
We were originally incorporated in Delaware on December 18, l997 under the
name "Autoeye Inc." Our initial plan of business was to merge with a company in
the industry of vehicle surveillance systems, but this plan was abandoned prior
to any operations. Prior to our acquisition of The Forest Industry Online Inc.
we had not commenced any operations other than initial corporate formation and
capitalization.
On January 31, 2000 we acquired all of the issued and outstanding common
shares of The Forest Industry Online Inc. in exchange for 10,000,000 shares of
our common stock. The Forest Industry Online, Inc. has been in operation since
1995, first as a proprietorship and since January 1997 as a corporation.
Concurrent with the acquisition of The Forest Industry Online Inc. we issued 750
shares of our Series A Convertible preferred stock at a price of $1,000 per
share for gross proceeds of $750,000. We also issued 37,500 shares of our common
stock to a company controlled by our former president as consideration for
consulting services provided in connection with our acquisition of The Forest
Industry Online Inc.
Following the acquisition of The Forest Industry Online Inc. Mr. Perraton,
a principal of The Forest Industry Online Inc., was appointed as our President
as well as a director. Mr. Marc White was also appointed as director. Our former
President, Andrew Hromyk, resigned from that position and was appointed as our
Secretary. Mr. Hromyk resigned as an officer and director in May 2000.
On February 25, 2000, we changed our name from Autoeye Inc. to
forestindustry.com, Inc.
<PAGE>
Our business is now that which was being conducted by The Forest Industry
Online, Inc. and any reference in this prospectus to "we" or "our", unless
otherwise indicated, includes The Forest Industry Online, Inc.
Products and Services
Our internet site provides a directory of companies associated with the
forest and wood industry. Our website is divided into three categories: Forest
and Logging, Wood Processing and Logs, Lumber and Wood Products. Companies may
advertise their services on the site and exchange information through our online
discussion forums. Our website includes The World Wood Exchange which allows
manufacturers, buyers and intermediaries to purchase and sell all types of wood
products through the website. Our website also provides information on industry
related trade shows, conferences and news items. All updates and changes made to
the website are completed by our in-house technical staff. We generate revenues
from this web site by charging a monthly fee to customers based on the size of
the advertisement and services offered.
To date, approximately 60% of revenues have been generated through this
online service and the other 40% through internet related services.
The internet related services which we provide are essentially all
services which a business needs to promote itself and to advertise and/or sell
its products and services through the internet. We charge either a monthly fee
for these services or a fee based upon the number of hours involved in the
project. Our services, all of which can be customized to the specific needs of
the customer, include:
o complete web site design and maintenance;
o design and maintenance of databases for new and used equipment, parts and
supplies, inventories of wood products, real estate listings, and
customers;
o design of forms used to pay for products and services with a credit card;
o customized layouts for order forms, multi-state tax calculations,
international taxes;
o database administration programs which provide customers with the ability
to modify product prices, descriptions and shipping methods based on price,
quantity and weight variables;
o transaction and billing reports;
o online storefronts and catalogues for products and services offered by our
members;
o online classified advertisements;
o email accounts for members.
We have a technical and customer support staff which is available during
business hours to assist all members with the use of our services.
New Products
We plan to develop an online business exchange for the forest and wood
industry called the Lumber and Equipment Exchange, or LEE. The LEE will host
auctions of lumber, equipment and other wood products. Revenue will be generated
on a commission basis. We expect that the LEE will be operational by September
<PAGE>
2000. Related services which we plan to offer to the customers of the LEE
include credit verification, delivery scheduling, inspection services and
payment settlement.
We also plan to design a standard storefront for our members. We intend to
upgrade existing storefronts used by our members to increase their efficiency.
Once our standard storefront is developed, we will be able to adapt it to the
needs of any of our customers with minimal effort.
Sales and Marketing
We participate in industry trade shows and conferences, advertise in
industry journals, and work with key forest associations to advertise our
products and services. We publish a yearly guidebook which includes information
on our products and services, upcoming industry conferences and events as well
as a directory listing of organizations which utilize our online services. Due
to the seasonal nature of the forest industry, our advertising and marketing
expenses will normally be higher in the second and fourth quarters.
We currently have over 500 customers and have no reliance on any specific
customer or small group of customers. Approximately 70% of our customers are
U.S. companies and the majority of our other customers are from Canada, Europe,
Asia and Australasia.
Competition
There are very few internet websites in the forest industry sector. Our
competitors include E-wood.com, Talpx.com, VerticalNet, and recent startup
company's such as forestweb.com.
e-Wood.com and Talpx Inc. provide internet websites which connect buyers
and sellers of wood and related products and include news and information for
the wood products industry.
VerticalNet provides websites for companies in the forest and wood
products industry but does not currently provide any news or information or its
websites which relate to the forest or wood products industry.
Indirect competitors include various webhosting and web design companies
ranging from large corporate internet service providers to small home-based
businesses. These competitors comprise a small proportion of our competition
since they have little or no knowledge of the forest industry.
Intellectual Property, Government Approvals and Regulation
Our internet services, web site design and database programs are not
protected by any patents or copyrights. We are not subject to government
regulation nor do we require any government approvals in either Canada or the
United States to provide internet or web design services to our customers. As
the internet is rapidly changing, regulations may be imposed in future with
which we will have to comply.
<PAGE>
Employees
As of May 15, 2000 we had 23 full-time employees. We anticipate hiring 15
more employees over the next six months to service customers using our web site.
Offices and Equipment
Our corporate offices are located at Suite 504, 999 Canada Place,
Vancouver, British Columbia V6C 3E1 where we lease approximately 2,000 square
feet of space under a lease which expires on September 30, 2001. Our operational
and administrative offices are temporarily located at #6, 2150 Bowen Road,
Nanaimo, British Columbia, Canada V9S 1H7. We lease approximately 2,275 feet of
office space at this location on a month-to-month basis.
All of our computer and telecommunications equipment is located at our
Nanaimo offices. As of May 15, 2000 we were operating at 30% to 40% capacity and
do not foresee the need to upgrade until our customer base doubles.
Management
Name Age Position
Joe Perraton 35 President, Secretary and a Director
John A. Carmichael 30 Chief Information Officer of The Forest Industry
Online Inc.
Todd Hilditch 32 Vice-President
Marc Ralph White 40 Director
Joe Perraton has served as president, co-founder and operations manager
since the inception of the business "forest industry online" as a proprietorship
in 1995. As co-founder Mr. Perraton had a unique vision of how the forest
industry could use the internet to improve the industry as a whole. With over 10
years experience directly in the forest industry and over five years working
with internet and client/sever technologies. Mr. Perraton has insight on how
technologies relate to the forest industry. Prior to establishing The Forest
Industry Online Inc. Mr. Perraton was engaged in the forest industry as an
independent logging contractor.
John A. Carmichael, an internet systems architect, has been an independent
technical consultant for the past 4 years, providing services as a subcontractor
to IMRglobal Corp. From 1990 to 1994 Mr. Carmichael was employed as a sawmill
worker by Tolko Industries Ltd. Mr. Carmichael has extensive experience in
designing and implementing database enabled applications and is fluent in
application servers, database servers, Microsoft and Java technologies and
Internet based applications. Mr. Carmichael specializes in systems integration,
and has provided systems architecture for Creo Products Inc., BC Ferries
Corporation, Canadian Pacific Railways and the government of Ontario. Mr.
Carmichael studied computer science at Simon Fraser University in Vancouver,
British Columbia.
<PAGE>
Todd Hilditch has been an independent business consultant for the past 7
years. From 1992 to 1993 Mr. Hilditch was a financial planner with Albany
Financial Group, a private financial planning firm. Prior to this Mr. Hilditch
was a professional hockey player. Mr. Hilditch has been involved in all aspects
of public company business formation, including seed capital financing, business
plan development and implementation, senior listing applications and shareholder
communication. Mr. Hilditch has provided consulting services to two start-up
environmental wood product companies, Kafus Industries Ltd. and The Canfiber
Group Ltd., both of which are publicly held companies listed on the American
Exchange and the Canadian over-the-counter market, respectively. Mr. Hilditch is
also the President and a director of Terraco Energy Corporation, an oil and gas
exploration company. Mr. Hilditch holds a Bachelor of Science degree in
Management from Rensselaer Polytechnic Institute in New York State.
Marc Ralph White has 25 years experience working directly in the harvesting
sector of the forest industry. Mr. White's work in the harvesting sector has
been based on contract work for various businesses. Currently, Mr. White is a
contractor for a large forest company and a partner in many small woodlots with
continual involvement in the industry. Mr. White's business experience and
in-depth industry knowledge have enabled him to assist in guiding the business
development of The Forest Industry Online Inc., as well as providing valuable
management experience.
Each director holds office until his successor is duly elected by the
stockholders. Executive officers serve at the pleasure of the board of
directors.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation received
by our Chief Executive Officer during the fiscal years ending May 31, 1998 and
1999. None of our officers received salaries and bonuses in excess of $100,000
during the fiscal year ended May 31, 1999. None of the officers of our
subsidiary, the Forest Industry Online, Inc., received salaries and bonuses in
excess of $100,000 during any twelve month period.
Other Re-
Annual stricted
Compen- Stock Options
Name and Fiscal Salary Bonus sation Awards Granted
Principal Position Year
Andrew Hromyk,
President and Chief 1999 -- -- -- -- --
Executive Officer
prior to January 31,
2000 1998 -- -- -- -- --
Following the acquisition of The Forest Industry Online Inc., Joe Perraton,
a principal of The Forest Industry Online Inc., was appointed President as well
as a director. Andrew Hromyk, resigned as President and was appointed as our
Secretary. Mr. Hromyk resigned as an officer and director in May 2000.
<PAGE>
Proposed Compensation
The following shows the amount which we expect to pay to our executive
officers during the twelve months ending February 28, 2001 and the time which
our executive officers plan to devote to our business.
Proposed Time to be Devoted
Name Compensation To Company's Business
Joe Perraton $50,000 100%
John A. Carmichael $50,000 100%
Todd Hilditch $30,000 90%
Our board of directors may increase the compensation paid to our officers
depending upon the results of our future operations.
Employment Agreements
Except as provided below we do not have any written employment contracts
with any of our executive officers and we do not have any compensatory plan or
arrangement that results or will result from the resignation, retirement, or any
other termination of any executive officer's employment with forestindustry.com
or from a change in control of forestindustry.com or a change in an executive
officer's responsibilities following a change in control.
In January 2000 we acquired our wholly owned subsidiary, The Forest
Industry Online Inc. In connection with this acquisition The Forest Industry
Online Inc. entered into an employment agreement with Joe Perraton, the
President of The Forest Industry Online. The employment agreement provides for a
term of three years and an annual salary of Cdn$70,000 (approximately $50,000 at
current exchange rates).
In February 2000 our wholly owned subsidiary The Forest Industry Online
Inc. entered into an employment agreement with John Carmichael pursuant to which
Mr. Carmichael agreed to serve as that company's Chief Information Officer. The
employment agreement provides for a term of one year and an annual salary of
Cdn$75,000 (approximately $50,000 at current exchange rates). In addition,. Mr.
Carmichael was issued 150,000 shares of our common stock as consideration for
entering into this employment agreement.
In February 2000 our wholly owned subsidiary The Forest Industry Online
Inc. entered into a consulting agreement with Todd Hilditch pursuant to which
Mr. Hilditch agreed to serve as that company's corporate relations consultant.
The consulting agreement provides for a term of one year with monthly payments
of Cdn$3,500 (approximately $2,400 at current exchange rates). In addition, Mr.
Hilditch was issued 200,000 shares of our common stock as consideration for
entering into this consulting agreement.
<PAGE>
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or other Retirement Plans
We do not have a defined benefit, pension plan, profit sharing or other
retirement plan, although we may adopt one or more of such plans in the future.
Director's Compensation
At present we do not pay our directors for attending meetings of the board
of directors, although we expect to adopt a director compensation policy in the
future. We have no standard arrangement pursuant to which our directors are
compensated for any services provided as a director or for committee
participation or special assignments.
Except as disclosed elsewhere in this prospectus no director of
forestindustry.com received any form of compensation from our company during the
year ended May 31, 1999.
Stock Option Plan
In February, 2000 our board of directors adopted a Stock Option Plan (the
"Option Plan") which authorizes the issuance of options to purchase up to
250,000 shares of our common stock. The Option Plan will remain in effect until
February 2010, unless earlier terminated by action of our board of directors.
Pursuant to the Option Plan, our employees and officers are eligible to be
granted options. Our directors may not be granted options unless they also serve
as officers. The option exercise price is determined by the board of directors.
Options granted pursuant to the Option Plan terminate on the date
established by the board of directors when the option was granted and in any
event cannot exceed ten years from the date of grant.
Options granted pursuant to the Option plan may be either Incentive Stock
option within the meaning of Section 422 of the Internal Revenue Code or
Nonqualified Stock Options.
The exercise price of options granted pursuant to the Option Plan cannot
be less than the fair market value of the shares of our common stock on the date
of the grant and, in the case of Incentive Stock Options granted to any of our
employees who own more than 10% of the voting power of all classes of our
shares, the exercise price cannot be less than 110% of the fair market value of
the shares of our common stock on the date of the grant.
The Option Plan is administered by our board of directors. Our board of
directors has the authority to interpret the provisions of the Option Plan and
supervise the administration of the Option Plan. In addition, our board of
directors is empowered to select those persons to whom options are to be
granted, to determine the number of shares subject to each grant of an option
and to determine when, and upon what conditions or options granted under the
Option Plan will vest or otherwise be subject to forfeiture and cancellation.
<PAGE>
In the discretion of our board of directors, any option granted pursuant
to the Option Plan may include installment exercise terms such that the option
becomes fully exercisable in a series of cumulating portions. Our board of
directors may also accelerate the date upon which any option (or any part of any
options) is first exercisable. Any options granted pursuant to the Option Plan
will be forfeited if the "vesting" schedule established by the board of
directors at the time of the grant is not met. For this purpose, vesting means
the period during which the employee must remain an employee of
forestindustry.com or our subsidiary The Forest Industry Online Inc. At the time
an employee ceases working for us any options not fully vested will be forfeited
and cancelled. Payment for the shares of our common stock underlying the options
granted to our officers may be paid through the delivery of shares of our common
stock having an aggregate fair market value equal to the option price, provided
such shares have been owned by the option holder for at least one year prior to
such exercise. A combination of cash and shares of our common stock may also be
permitted at the discretion of the board of directors. Options are generally
non-transferable except upon death of the option holder.
Our board of directors may at any time, and from time to time, amend,
terminate, or suspend the Option Plan in any manner it deems appropriate,
provided that such amendment, termination or suspension cannot adversely affect
rights or obligations with respect to shares or options previously granted.
The Option Plan is not qualified under Section 401(a) of the Internal
Revenue Code, nor is it subject to any provisions of the Employee Retirement
Income Security Act of 1974.
Summary of Options Granted
The following sets forth certain information as of May 15, 2000, concerning
the stock options granted. Each option represents the right to purchase one
share of our common stock.
Total Shares Shares Reserved for Remaining Options
Reserved Under Plan Outstanding Options Under Plan
250,000 31,000 219,000
In February 2000, our board of directors granted options to purchase a
total of 31,000 shares of our common stock at a price of $4.00 per share to
twelve of our employees. The options vest on or after February 29, 2001 and
expire between February and April, 2005. No directors or officers have been
granted any options.
Certain Relationships and Related Transactions
We have issued shares of our common stock to the following persons during
the past two years, who are or were affiliated with forestindustry.com:
<PAGE>
Date of Number
Name Issuance of Shares Consideration
Teaco Properties Ltd. (1) 01/00 6,900,000 69 shares of The Forest
Industry Online Inc.
Joe Perraton 01/00 2,400,000 24 shares of The Forest
Industry Online Inc.
Century Capital 01/00 37,500 Consulting services
Management Ltd. (2)
John Carmichael 02/00 150,000 Services rendered
Todd Hilditch 02/00 200,000 Services rendered
(1) The beneficial owners of Teaco Properties are Marc Ralph White, one of our
directors and David McNaught, a director of The Forest Industry Online Inc.
(2) The beneficial owner of Century Capital Management Ltd. is Andrew Hromyk, a
former officer and director.
In May 2000 Bona Vista West Ltd., a former principal shareholder, returned
2,597,240 shares of common stock to us for cancellation.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of May 15, 2000, information with
respect to the only persons owning beneficially 5% or more of our outstanding
common stock and the number and percentage of outstanding shares owned by each
of our directors and officers and by our officers and directors as a group.
Unless otherwise indicated, each owner has sole voting and investment powers
over his shares of common stock.
Shares of Percent of
Name and Address Common Stock Class (2)
Teaco Properties Ltd. (1) 6,900,000 53.2%
5299 Budd Crescent
Nanaimo, British Columbia
V9T 5N9
Joe Perraton 2,400,000 18.5%
7491 Elizabeth Way
Lantzville, British Columbia
V0R 2H0
John Carmichael 150,000 1.2%
Suite 403
828 Howe Street
Vancouver, British Columbia
Canada V6Z 2X2
<PAGE>
Todd Hilditch 200,000 1.5%
Suite 1301
1188 Quebec Street
Vancouver, British Columbia
Canada V6A 4B3
All Officers and Directors 10,350,000 79.8%
as a Group (4 persons)
(1) Teaco Properties Ltd. is beneficially owned by Marc Ralph White, one of our
directors and David McNaught, a director of The Forest Industry Online Inc.
(2) Computed without giving effect to any common stock which may be issued upon
the conversion of our Series A Preferred shares. See "Dilution and
Comparative Share Data".
SELLING STOCKHOLDERS
In January 2000 we raised $750,000 from the sale of 750 shares of our
Series A preferred stock. Each Series A preferred share may be converted, at the
option of the holder, into shares of our common stock equal in number to the
amount determined by dividing $1,000 by the conversion price, which is 75% of
the average closing bid price of our common stock during the ten trading days
preceding the conversion date. The terms of the Series A preferred stock provide
that a maximum of 5,000 shares and a minimum of 250 shares of common stock can
issued upon the conversion of each Series A preferred share. In addition, all
Series A preferred shares will automatically convert into shares of common stock
on January 31, 2001 at the conversion rate described above. The shares of common
stock issuable upon the conversion of the remaining preferred shares are being
offered to the public by means of this prospectus.
In May 2000 Ascent Financial Inc. converted 375 preferred shares into 249,
221 shares of common stock which are being offered for public sale by this
prospectus.
This prospectus also relates to the sale of 237,500 shares offered by
certain other stockholders.
The owners of our common stock shown in the table below, as well as the
holders of the Series A preferred shares, to the extent they convert their
Series A preferred shares into shares of common stock, are referred to in this
prospectus as the selling stockholders. We will not receive any proceeds from
the sale of the shares by the selling stockholders.
<PAGE>
The names of the selling stockholders are:
Shares Which
May Be
Common Acquired Upon Shares to Share
Shares Conversion of be Sold Ownership
Beneficially Series A in this After
Name Owned Preferred Shares (1) Offering Offering
- ---------- --------- -------------------- -------- ---------
James F. Cool -- 95,420 95,420 --
Augustine Fund L.P. -- 190,840 190,840 --
Ascent Financial Inc. 249,221 -- 249,221 --
Teaco Properties Ltd. 6,900,000 -- 138,000 6,762,000
Joe Perraton 2,400,000 -- 48,000 2,352,000
Lara Perraton 700,000 -- 14,000 686,000
Century Capital
Management 37,500 -- 37,500 --
(1) The actual number of shares issuable upon the conversion of the preferred
stock will vary depending upon the price of our common stock on the date of
conversion. As of May 15, 2000, the bid price of our common stock was $1.75
per share. Accordingly, in computing the number of shares of common stock
shown in the table we used a conversion price of $1.31. Additional shares
may be issued upon the conversion of Series A preferred shares if the
market price of our common stock falls below $1.75 per share.
Plan of Distribution
The shares of common stock which may be acquired by the selling
stockholders may be offered and sold by means of this prospectus from time to
time as market conditions permit in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at prices related to the then-current
market price, or in negotiated transactions. These shares may be sold by one or
more of the following methods, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker-dealer. In making sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. These
brokers or dealers may receive commissions or discounts from selling
stockholders in amounts to be negotiated.
The costs of registering the shares offered by the selling stockholders
are being paid by forestindustry.com. The selling stockholders will pay all
other costs of the sale of the shares offered by them.
From time to time one or more of the selling stockholders may transfer,
pledge, donate or assign the shares received upon the conversion of the Series A
Convertible preferred stock referred to above (the "Conversion Shares") to
lenders or others and each of such persons will be deemed to be a selling
stockholder for purposes of this prospectus. The number of Conversion Shares
beneficially owned by those selling stockholders will decrease as and when they
<PAGE>
transfer, pledge, donate or assign the Conversion Shares. The plan of
distribution for the Conversion Shares sold by means of this prospectus will
otherwise remain unchanged, except that the transferees, pledgees, donees or
other successors will be selling stockholders for purposes of this prospectus.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of our common
stock in the course of hedging the positions they assume with such selling
stockholder, including, without limitation, in connection with the distribution
of our common stock by such broker-dealers. A selling stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the common stock to the broker-dealers, who may then resell or otherwise
transfer such common stock. A selling stockholder may also loan or pledge the
common stock to a broker-dealer and the broker-dealer may sell the common stock
so loaned or upon default may sell or otherwise transfer the pledged common
stock.
Broker-dealers, underwriters or agents participating in the distribution
of our common stock as agents may receive compensation in the form of
commissions, discounts or concessions from the selling stockholders and/or
purchasers of the common stock for whom such broker-dealers may act as agent, or
to whom they may sell as principal, or both (which compensation as to a
particular broker-dealer may be less than or in excess of customary
commissions). selling stockholders and any broker-dealers who act in connection
with the sale of common stock hereunder may be deemed to be "Underwriters"
within the meaning of the Securities Act, and any commissions they receive may
be deemed to be underwriting discounts and commissions under the Securities Act.
Neither we nor any selling stockholder can presently estimate the amount of such
compensation. We know of no existing arrangements between any selling
stockholder, any other stockholder, broker, dealer, underwriter or agent
relating to the sale or distribution of our common stock.
The selling stockholders and any broker-dealers who act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of ss.2(11) of the Securities Acts of 1933, and any commissions received
by them and profit on any resale of the Shares as principal might be deemed to
be underwriting discounts and commissions under the Securities Act.
We have advised the selling stockholders that they and any securities
broker-dealers or others who may be deemed to be statutory underwriters will be
subject to the prospectus delivery requirements under the Securities Act of
1933. We have also advised the selling stockholders that in the event of a
distribution of the shares owned by the selling stockholder, such selling
stockholders, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution may be subject to Rule 102 under the
Securities Exchange Act of 1934 ("1934 Act") until their participation in that
distribution is completed. A distribution is defined in Rule 102 as an offering
of securities "that is distinguished from ordinary trading transactions by the
magnitude of the offering and the presence of special selling efforts and
selling methods". We have also advised the selling stockholders that Rule 102
under the 1934 Act prohibits any "stabilizing bid" or "stabilizing purchase" for
the purpose of pegging, fixing or stabilizing the price of the common stock in
connection with this offering. Rule 101 makes it unlawful for any person who is
participating in a distribution to bid for or purchase stock of the same class
as is the subject of the distribution.
<PAGE>
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 30,000,000 shares of common
stock, $.0001 par value, and 5,000,000 shares of preferred stock, $.0001 par
value. As of May 15, 2000, there were 12,966,521 shares of common stock
outstanding and 375 shares of Series A preferred stock outstanding.
Common Stock
Holders of common stock are each entitled to cast one vote for each share
held of record on all matters presented to our stockholders. Cumulative voting
is not allowed; hence, the holders of a majority of the outstanding common stock
can elect all directors.
Holders of our common stock are entitled to receive such dividends as may
be declared by our board of directors out of funds legally available for
dividends and, in the event of liquidation, to share pro rata in any
distribution of our assets after payment of liabilities. Our board of directors
is not obligated to declare a dividend. It is not anticipated that dividends
will be paid in the foreseeable future.
Holders of our common stock do not have preemptive rights to subscribe to
additional shares if issued by us. There are no conversion, redemption, sinking
fund or similar provisions regarding the common stock. All of the outstanding
shares of common stock are fully paid and nonassessable and all of the shares of
common stock issued upon the conversion of the Series A preferred stock will be,
upon issuance, fully paid and non-assessable.
On June 16, 1999 we consolidated our outstanding share capital by way of a
reverse stock split on the basis of two old shares for each one new share. No
fractional shares were issued. This transaction was undertaken for the purpose
of reducing our outstanding share capital to facilitate the acquisition of a
business opportunity.
On August 20, 1999 we consolidated our outstanding share capital by way of
reverse stock split on the basis of twenty-one old shares for each one new
share. No fractional shares were issued. This transaction was undertaken for the
purpose of eliminating shareholders owning less than twenty-one shares of our
common stock as the costs to transfer such small blocks of shares far outweighed
their value. This transaction reduced our issued and outstanding shares to
123,176 shares of common stock.
On August 21, 1999 we increased our outstanding share capital by way of a
forward stock split on the basis of forty new shares for each one old share.
This transaction increased our issued and outstanding shares to 4,927,040 shares
of common stock.
In May 2000 Bona Vista West Ltd., a former principal shareholder, returned
2,597,240 shares of common stock to us for cancellation.
<PAGE>
Preferred Stock
Our Articles of Incorporation provide that our board of directors has the
authority to divide the preferred stock into series and, within the limitations
provided by Delaware statute, to fix by resolution the voting power,
designations, preferences, and relative participation, special rights, and the
qualifications, limitations or restrictions of the shares of any series so
established. As our board of directors has authority to establish the terms of,
and to issue, the preferred stock without Stockholder approval, the preferred
stock could be issued to defend against any attempted takeover of us.
In January, 2000, our board of directors established our Series A
preferred stock and authorized the issuance of up to 750 shares of Series A
preferred stock as part of this series. Upon any liquidation or dissolution of
our Company, each outstanding Series A preferred share is entitled to a
distribution of $1,000 prior to any distribution to the holders of our common
stock. The Series A preferred shares are not entitled to any dividends or voting
rights. In January 2000, we sold 750 Series A preferred shares to a group of
private investors for $1,000 per share. Each Series A preferred share may be
converted, at the option of the holder, into shares of our common stock equal in
number to the amount determined by dividing $1,000 by 75% of the average closing
bid price of our common stock for the ten trading days preceding the conversion
date, subject to a maximum of 5,000 shares of common stock being issued for each
Series A preferred share and a minimum of 250 shares of common stock being
issued for each Series A preferred share. In addition, all outstanding Series A
preferred shares will automatically convert into shares of common stock on
January 31, 2001 at the conversion rate described above. In May 2000 Ascent
Financial Inc. converted 375 Series A preferred shares into 249,221 shares of
common stock. The shares of common stock issuable upon the conversion of the
remaining Series A preferred shares are being offered for sale to the public by
means of this prospectus. See "Selling Stockholders".
LEGAL PROCEEDINGS
We are not a party to any pending or threatened legal proceeding.
EXPERTS
The financial statements of Autoeye, Inc. at May 31, 1999 and 1998, and
for the year ended May 31, 1999 and for each of the periods from December 31,
1997 (date of incorporation) to May 31, 1999 and 1998 (all of which were
prepared prior to the reverse acquisition), appearing in this prospectus have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
The audited Balance Sheet of The Forest Industry Online Inc. as of July
31, 1998 and 1999, and the Combined Statements of Operations and Retained
Earnings (Deficit) and Cash Flows for two years then ended have been included
herein in reliance on the report of Watson Dauphinee & Masuch, Chartered
Accountants, given on the authority of that firm as experts in accounting and
auditing.
<PAGE>
INDEMNIFICATION
Our bylaws authorize indemnification of a director, officer, employee or
agent of forestindustry.com against expenses incurred by him in connection with
any action, suit, or proceeding to which he is named a party by reason of his
having acted or served in such capacity, except for liabilities arising from his
own misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent of forestindustry.com who was found liable
for misconduct or negligence in the performance of his duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling forestindustry.com pursuant to the foregoing provisions, We have
been informed that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form SB-2 together with all amendments and exhibits, under the
Securities Act of 1933, as amended with respect to the securities offered by
this prospectus. This prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement. The Registration
Statement and amendments and exhibits may also be reviewed at the internet web
site maintained by the Securities and Exchange Commission at www.sec.gov.
<PAGE>
Financial Statements
AUTOEYE INC.
(A development stage enterprise)
May 31, 1999 and 1998
<PAGE>
REPORT OF INDEPENDENT AUDITOR
To the Directors of
Autoeye Inc.
We have audited the accompanying balance sheets of Autoeye Inc. (a development
stage enterprise) as of May 31, 1999 and 1998 and the related statements of
operations, stockholders' equity and cash flows for the year ended May 31, 1999
and for each of the periods from December 18, 1997 (date of incorporation) to
May 31, 1998 and 1999. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Autoeye Inc. at May 31, 1999
and 1998, and the results of its operations and its cash flows for the year
ended May 31, 1999 and for each of the periods from December 18, 1997 (date of
incorporation) to May 31, 1998 and 1999, in conformity with accounting
principles generally accepted in the United States.
Vancouver, Canada, Ernst & Young LLP
June 16, 1999 Chartered Accountants
<PAGE>
Autoeye Inc.
(A development stage enterprise)
BALANCE SHEETS
As at May 31 (expressed in U.S. dollars)
1999 1998
$ $
- ------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accrued liabilities 3,500 --
Due to related party [note 4] 8,142 1,890
- ------------------------------------------------------------------------------
Total current liabilities 11,642 1,890
- ------------------------------------------------------------------------------
Stockholders' equity
Share capital [note 3]
Common stock - $0.0001 par value
30,000,000 authorized; 2,587,778
issued and outstanding 259 259
Preferred stock - $0.0001 par value
5,000,000 authorized
Additional paid in capital 4,751 4,751
Deficit accumulated in the development
stage (16,652) (6,900)
- ------------------------------------------------------------------------------
(11,642) (1,890)
- -------------------------------------------------------------------------------
-- --
- -------------------------------------------------------------------------------
See accompanying notes
On behalf of the Board:
Director
<PAGE>
Autoeye Inc.
(A development stage enterprise)
STATEMENTS OF OPERATIONS
(expressed in U.S. dollars)
Period from Period from
December 18, December 18,
1997 (date of 1997 (date of
Year ended incorporation) incorporation) to
May 31, 1999 to May 31, 1998 May 31, 1999
$ $ $
- -------------------------------------------------------------------------------
EXPENSES
Professional fees 9,752 6,900 16,652
- -------------------------------------------------------------------------------
Loss for the period 9,752 6,900 16,652
Deficit, beginning of period 6,900 -- --
- -------------------------------------------------------------------------------
Deficit, end of period 16,652 6,900 16,652
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
Autoeye Inc.
(A development stage enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY
(expressed in U.S. dollars)
Deficit
accumulated
Common stock Additional in the
Number paid in development
of shares Amount capital stage Total
$ $ $ $ $
------------------------------------------------------
Issuance of common stock 2,587,778 259 4,751 -- 5,010
Loss for the period -- -- -- (6,900) (6,900)
- -------------------------------------------------------------------------------
Balance, May 31, 1998 2,587,778 259 4,751 (6,900) (1,890)
Loss for the period -- -- -- (9,752) (9,752)
- -------------------------------------------------------------------------------
Balance, May 31, 1999 2,587,778 259 4,751 (16,652) (11,642)
==============================================================================
See accompanying notes
<PAGE>
Autoeye Inc.
(A development stage enterprise)
STATEMENTS OF CASH FLOWS
(expressed in US dollars)
Period from Period from
December 18, December 18,
1997 (date of 1997 (date of
Year ended incorporation) incorporation)
May 31, 1999 to May 31, 1998 to May 31, 1999
$ $ $
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (9,752) (6,900) (16,652)
Changes in operating assets and
liabilities:
Accrued liabilities 3,500 -- 3,500
- -------------------------------------------------------------------------------
Net cash used in operating activities (6,252) (6,900) (13,152)
FINANCING ACTIVITIES
Proceeds from capital contributions -- 5,010 5,010
Due to related party 6,252 1,890 8,142
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net cash provided by financing activities6,252 6,900 13,152
Net change in cash during the period,
and cash, end of period -- -- --
- -------------------------------------------------------------------------------
See accompanying notes
<PAGE>
Autoeye Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
(expressed in U.S. dollars)
1. FORMATION AND BUSINESS OF THE COMPANY
Autoeye Inc. (the "Company") was incorporated in Delaware on December 18, 1997
pursuant to the laws of Delaware.
Prior to the merger (as defined below), Autoeye Inc. and Autoeye Corporation, a
Colorado company, were companies under common control.
On January 9, 1998, Autoeye Inc. and Autoeye Corporation merged through an
exchange of shares.
The merger has been accounted for in a manner similar to a pooling of interests
and accordingly the financial statements of the Company include the results of
Autoeye Inc. and Autoeye Corporation since their inception, which in the case of
Autoeye Inc. was December 18, 1997 and Autoeye Corporation was December 10,
1997. The share capital of the Company has been presented giving effect to the
exchange of shares from incorporation.
The Company is a development stage company and has had no activity other than
issuing shares and preparing an initial business plan. Its sole purpose at this
time is to locate and consummate a merger or acquisition with an as yet
unidentified private entity.
Since incorporation, a related company [see note 4] provided administrative
services and facilities to the Company for nil consideration and paid for
expenses on behalf of the Company. It is anticipated that the Company will
continue to receive non interest bearing advances from this related party to pay
for future expenses as incurred.
2. SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from these estimates.
<PAGE>
Autoeye Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
(expressed in U.S. dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Income taxes
The Company uses the liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
difference between financial statement and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance in respect of amounts considered by management
to be less likely than not of realization in future periods.
3. SHARE CAPITAL
Holders of the common stock are entitled to one vote per share and to share
equally any dividends declared and distributions in liquidation.
On June 16, 1999, the Company consolidated its share capital by way of a reverse
stock split on the basis of one new common share for each two old common shares.
All outstanding shares in these financial statements have been retroactively
adjusted to reflect this share consolidation.
4. RELATED PARTY TRANSACTIONS
Since incorporation, a company controlled by the director of the Company has
provided administrative services and facilities to the Company for nil
consideration and pays expenses on behalf of the Company. The amount due to this
company is without interest or stated terms of repayment. It is anticipated the
Company will continue to receive non interest bearing advances from this company
to pay for future expenses as incurred.
<PAGE>
Autoeye Inc.
(A development stage enterprise)
NOTES TO FINANCIAL STATEMENTS
May 31, 1999
(expressed in U.S. dollars)
5. 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. 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.
<PAGE>
forestindustry.com, Inc.
(formerly Autoeye Inc.)
Interim Consolidated Financial Statements
February 29, 2000
(In U.S. $)
Unaudited (Prepared by Management)
<PAGE>
Interim Consolidated Balance Sheet
As at February 29, 2000 (In U.S. $)
- -----------------------------------------------------------------------------
$
ASSETS
CURRENT
Cash and Cash Equivalents 517,805
Accounts Receivable (Net of Allowance for Doubtful
Accounts - 10,353) $ 79,504
Prepaid Expenses 4,805
---------
602,114
Equipment 58,996
---------
661,110
---------
LIABILITIES and STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Operating Line of Credit (Note 4) 10,348
Accounts Payable and Accrued Liabilities 50,921
Unearned Revenues 57,764
---------
119,033
---------
Commitments (Note 6)
STOCKHOLDERS' EQUITY
Share Capital
Common stock, $0.0001 par value
30,000,000 authorized; 15,314,540 issued and outstanding 1,531
Preferred stock, $0.0001 par value
5,000,000 authorized; 750 issued and outstanding 1
Additional paid in capital 737,853
Cumulative Translation Adjustment 1,842
Deficit (199,150)
---------
542,077
---------
661,110
---------
Unaudited - "See accompanying notes to the consolidated financial statements"
<PAGE>
Interim Consolidated Statements of Operations and Comprehensive Income
- ------------------------------------------------------------------------------
For the Three and Nine Month Periods Ended February 29, 2000 and February 28,
1999 (In U.S. $)
- -------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
---------------------------------------------
Feb. 29, Feb. 28, Feb. 29, Feb. 28,
2000 1999 2000 1999
$ $ $ $
REVENUES 101,052 74,590 264,144 178,323
---------------------------------------------
EXPENSES
Advertising and Promotion 2,887 278 3,584 -
Depreciation 2,029 1,940 8,753 7,095
Bad Debts 6,544 461 18,044 3,856
Interest 2,865 3,530 11,033 12,317
Consulting Fees 17,211 - 17,490 1,828
Filing Fees 3,684 - 3,703 -
Office 14,015 3,080 20,788 5,221
Printing 15,286 4,097 23,720 4,680
Professional Fees 14,610 2,882 33,411 13,542
Rent, Property Taxes and 5,794 1,717 14,250 5,316
Utilities
Salaries and Benefits 67,615 36,493 173,043 98,467
Telephone 6,576 2,198 13,398 7,233
Trade Shows 2,566 - 9,466 817
Travel and Lodging 8,336 1,372 21,049 5,099
---------------------------------------------
170,018 58,048 371,732 165,471
---------------------------------------------
NET INCOME (LOSS)
FOR THE PERIOD (68,966) 16,542 (107,588) 12,852
Translation Adjustment Gain 284 181 851 543
---------------------------------------------
COMPREHENSIVE INCOME (LOSS)
FOR THE PERIOD (68,682) 16,723 (106,737) 13,395
---------------------------------------------
Weighted Average Number of
Shares Outstanding, Basic and 11,596,94110,000,000 10,530,371 10,000,000
Diluted
---------------------------------------------
Earnings (Loss) per Common
Share, (0.006) (0.002) (0.01) 0.001
Basic and Diluted
---------------------------------------------
Unaudited - "See accompanying notes to the consolidated financial statements"
<PAGE>
Interim Consolidated Statements of Stockholders' Equity
For the Periods from May 31, 1999 to February 29, 2000 (In U.S. $)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common Stock Preferred Stock Deficit Total
---------------- -------------------
Additional Cumulative
Number Number Paid in Translation
of Shares Amount of Amount Capital Adjustment
Shares
$ $ $ $ $ $
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1999 2,587,778 258 - - 4,752 - (16,652) (11,642)
Common stock issued to purchase all
issued and outstanding shares
of The Forest Industry Online Inc.,
January 31, 2000 (note 3) 10,000,000 1,000 - - - - - 1,000
Adjustment to comply with
recapitalization
accounting (note 3) 2,339,262 234 - - (25,772) 991 (74,910) (99,457)
Common stock issued for service,
January 31, 2000, valued at
approximately $0.023 per share
(note 3) 37,500 4 - - 859 - - 863
750 Series `A' convertible preferred
shares issued for cash, January 31,
2000 at $1,000 per share (note 3) -- - 750 1 749,999 - - 750,000
Common stock issued for services in
February, 2000 valued at approximately
$0.023 pershare (note 5(c)) 350,000 35 - - 8,015 - - 8,050
Translation Adjustment for the Period - - - - - 851 - 851
Net Loss for the Period - - - - - (107,588) (107,588)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, February 29, 2000 15,314,540 1,531 750 1 737,853 1,842 (199,150) 542,077
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unaudited - "See accompanying notes to the consolidated financial statements"
<PAGE>
Interim Consolidated Statements of Cash Flows
For the Nine Month Periods Ended February 29, 2000 and February 28, 1999 (In
U.S. $)
2000 1999
$ $
CASH WAS PROVIDED FROM, UTILIZED (FOR):
OPERATING ACTIVITIES:
Net Income (Loss) for the Period (107,588) 12,852
Non-Cash Items:
Depreciation 8,753 7,095
Common Stock Issued in Exchange for Services 8,050 -
Change in Non-Cash Working Capital Accounts
Accounts Receivable (22,324) (22,173)
Prepaid Expenses (4,565) -
Accounts Payable and Accrued Liabilities 30,454 (2,118)
Unearned Revenues 33,742 9,487
-------------------------
Net Cash Provided by Operating Activities (53,478) (5,143)
-------------------------
FINANCING ACTIVITIES
Long-term Debt and Operating Line of Credit (60,860) 79,930
Advances (Repayments)
Advances (to) Related Company (71,229) (66,862)
Advances from (to) Shareholders (12,463) 11,918
Net Proceeds from Issuance of Preferred Stocks 750,000 -
-------------------------
Net Cash Provided by Financing Activities 605,448 24,986
-------------------------
INVESTING ACTIVITY
Acquisition of Capital Assets (37,712) (18,634)
-------------------------
INCREASE IN CASH 514,258 11,495
Cash, Beginning of the Period 3,547 4,317
-------------------------
CASH, END OF THE PERIOD 517,805 15,812
-------------------------
Supplemental Disclosure
Interest Paid 11,033 12,317
-------------------------
Unaudited - "See accompanying notes to the consolidated financial statements"
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- ------------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
forestindustry.com, Inc. (the "Company") was incorporated in Delaware on
December 18, 1997 under the name of Autoeye Inc. On February 25, 2000, the
Company changed its name to forestindustry.com, Inc. Prior to its acquisition of
The Forest Industry Online Inc. ("Forest") (note 2(a)), the Company was
inactive.
The Company's current business activities include designing web sites and
operating and maintaining a computer internet web site for companies associated
with the forest industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Reverse Takeover
On January 31, 2000, the Company merged with Forest, with Forest's stockholders
receiving 10,000,000 shares of common stock and control of the Company.
Accordingly, Forest is deemed the accounting acquiror for financial statement
purposes. The acquisition, a reverse takeover, has been accounted for as a
capital transaction effectively representing an issue of stocks by Forest for
the net assets of forestindustry.com, Inc.
The Company's historical financial statements reflect the financial position,
results of operations and cash flows of Forest from the date of its
incorporation on January 09, 1997 under the laws of the Province of British
Columbia. The historical stockholders' equity gives effect to the shares issued
to the stockholders of Forest. The results of operations of forestindustry.com,
Inc. are included only from the date of acquisition, January 31, 2000.
b) Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles for interim financial information and the rules of the Securities and
Exchange Commission (the "SEC") for quarterly reports on Form 10-QSB. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
c) Basis of Consolidation
These consolidated financial statements include the accounts of the Company's
wholly-owned subsidiary, The Forest Industry Online Inc. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
d) Equipment and Depreciation
Equipment are recorded at cost and are depreciated using the straight-line
method over their estimated useful lives ranging from five to ten years.
e) Cash and Cash Equivalents
The Company considers all short-term investments with a maturity date at
purchase of three months or less to be cash equivalents.
Unaudited
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- --------------------------------------------------------------------------------
Note 2 - Significant Accounting Policies (continued)
f) Revenue Recognition and Unearned Revenues
Revenues are recorded on the billed basis. Customers are billed on a quarterly
basis in advance for advertising fees and hosting revenue. Unearned revenues
relate to the period of the billing that has not yet transpired and therefore
not earned.
g) 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 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.
h) Net Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the weighted average number of
common stock outstanding during the periods. Diluted loss per share is computed
using the weighted average number of common and potentially dilutive common
stock outstanding during the period. As the Company has losses in the periods
presented, basic and diluted loss per share is the same.
i) Stock-based Compensation
The Company accounts for its stock-based compensation arrangement in accordance
with provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations. As such,
compensation expense under fixed plans would be recorded on the date of grant
only if the fair value of the underlying stock at the date of grant exceeded the
exercise price. The Company recognizes compensation expense for stock options,
common stock and other equity instruments issued to non-employees for services
received based upon the fair value of the services or equity instruments issued,
whichever is more reliably determined. This information is presented in note
5(c).
SFAS No. 123, Accounting for Stock Based Compensation, required entities that
continue to apply the provision of APB Opinion No. 25 for transactions with
employees to provide for forma net income and pro forma earnings per share
disclosures for employee stock option grants made in 1995 and future years as if
the fair-value -based method defined in SFAS No. 123 had been applied to these
transactions.
j) Foreign Currency Translation
The functional currency of the Company is the United States dollar and for its
Canadian subsidiary the Canadian dollar. Transactions in foreign currencies are
translated to United States dollars at the rates in effect on the transaction
date. Exchange gains or losses arising on translation or settlement of foreign
currency denominated monetary items are included in the consolidated statement
of operations.
Unaudited
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- -------------------------------------------------------------------------------
Note 3 - Acquisition
On January 31, 2000, the Company merged with Forest. The acquisition was a
reverse takeover with Forest being the deemed accounting acquiror for financial
statement purposes.
Under the terms of agreement, the Company issued 10,000,000 common shares for
all of the 100 common issued and outstanding shares of Forest. As at January 31,
2000, there were 4,927,040 common shares of the Company (after reflecting a 21:1
stock consolidation which occurred on August 20, 1999 and a subsequent stock
split of 1:40 which occurred on August 21, 1999). The acquisition was accounted
for as a recapitalization of Forest. The transaction has been accounted for as a
capital transaction effectively representing an issue of shares by Forest for
the net assets of the Company. On January 31, 2000 the net assets of the Company
consisted of:
Cash and Cash Equivalents $ 750,000
Accounts Payable (19,703)
------------
$ 730,297
------------
Total costs related to this recapitalization transaction were estimated at
$15,863. They include cash expense in the estimated amount of $15,000 and
non-cash expense in the amount of $863. The non-cash expense relates to the
issuance of 37,500 shares of common stock of the Company. The fair value of
these services was estimated based upon the estimated fair value of the shares
at $0.023 per share. Total transaction costs have been recorded as a charge to
the stockholders' equity of the Company.
Cash and cash equivalents held by the Company in the amount of $750,000 were
obtained through subscriptions for a private placement of 750 shares of Series
"A" Convertible Preferred Stock at a price of $1,000 per share. The closing of
this private placement and the release of funds held in escrow were contingent
on this acquisition being completed. The shares of Series "A" preferred stock
are convertible, at the option of the holder, and at any time after March 16,
2000, into common stock at 75% of the last ten day average closing bid price of
the Company subject to a maximum conversion rate of 5,000 shares of common stock
for one share of preferred stock and a minimum conversion rate of 250 shares of
common stock for one share of preferred stock. In addition, if a registration
statement in respect of the common stock underlying the preferred stock is
effective, all Series "A" preferred stock will be deemed to convert into common
stock on or before January 31, 2001, the first anniversary date.
The following table reflects unaudited pro forma information which combines the
operations of forestindustry.com, Inc. for the nine months ended February 29,
2000 and February 28, 1999 as if the acquisition of forestindustry.com, Inc. had
taken place at the beginning of the period. There were no pro forma adjustments
required in combining this information of these two entities. This pro forma
information does not reflect any non-recurring charges or credits directly
attributable to the transaction. This pro forma information does not purport to
be indicative of the revenues and net loss that could have resulted had the
acquisition been in effect for the period presented and is not intended to be a
projection of future results or trends.
Unaudited
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- -------------------------------------------------------------------------------
Note 3 - Acquisition (continued)
Nine Months Ended
February 29, 2000 February 28, 1999
$ $
Revenues 264,144 178,323
Expenses
Bad Debts 18,044 3,856
Promotion and Trade Shows 34,098 5,916
General and Administrative 103,562 35,207
Professional Fees 54,756 25,122
Wages 169,158 105,122
------------------------------------
Net Income (Loss) for the Period (115,474) 3,100
------------------------------------
Net Loss Per Share (0.01) --
------------------------------------
Note 4 - Operating Line of Credit
The Company has a $10,347 (CDN $15,000) revolving operating line of credit with
the Royal Bank of Canada. The line of credit is payable on demand, bears
interest at prime plus 1.75% per annum payable monthly, and is secured by a
general security agreement over all assets of the Company, guarantees by a
corporate shareholder and personal guarantee of the principals of the Company.
The line of credit was paid off in March, 2000 and the general security
agreement as well as the guarantees are being removed.
Note 5 - Stockholders' Equity
a) Preferred Stock
On January 31, 2000, the Company issued through a private placement 750 shares
of Series "A" Convertible Preferred Stock at a price of $1,000 per share.
Holders of Series "A" Preferred Stocks are entitled to distribution of $1,000
per share prior to any distribution to the holders of the Company's common
stocks in the event of any liquidation or dissolution of the Company.
The Series "A" preferred stock is convertible, at the option of the holder, and
at any time after March 16, 2000, into common stock at 75% of the last ten day
average closing bid price of the Company subject to a maximum conversion rate of
5,000 shares of common stock for one share of preferred stock and a minimum
conversion rate of 250 shares of common stock for one share of preferred stock.
In addition, if a registration statement in respect of the common stock
underlying the preferred stock is effective, all Series "A" preferred stock will
be deemed to convert into common stock on or before January 31, 2001, the first
anniversary date.
Unaudited
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- -----------------------------------------------------------------------------
Note 5 - Stockholders' Equity (continued)
b) Stock Options
In February, 2000, the Company adopted a fixed stock option plan that provides
for the issuance of incentive and non-qualified stock options to officers,
directors and employees to acquire up to 250,000 shares of the Company's common
stock.
The Board of Directors determines the terms of the options granted, including
the number of options granted, the exercise price and the vesting schedule. The
exercise price for qualified incentive stock options is not to be less than the
fair market value of the underlying stock at the date of grant, and to have
terms no longer than ten years from the date of grant.
On February 29, 2000, the Company granted options to purchase a total of 31,000
shares of the Company's common stock at a price of $4.00 per share to employees
of the Company. The options vest on or after February 29, 2001 and expire
between February and April, 2005.
The Company has elected to follow Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" (APB25) in accounting for its
employee stock options. Under APB25, because the exercise price of the Company's
options for common shares granted to employees is not less than the fair market
value of the underlying stock on the date of grant, no compensation expense has
been recognized.
c) Stock-Based Compensation
In January, 2000, the Company issued 37,500 shares of common stock in exchange
for services relating to the acquisition of forestindustry.com, Inc. The fair
value of these services was estimated based upon the estimated fair value of the
shares at $0.023 per share or $863. The costs were deducted from the additional
paid-in capital from the said acquisition.
In February, 2000, the Company recorded non-cash compensation expense of $8,050
related to the issuance of 350,000 shares of common stock to certain employees
of the Company. The fair value of the shares was estimated at $0.023 per share
at the time of the transaction.
Note 6 - Commitments
a) The Company has entered into an agreement to lease office premises to
September 30, 2001. The monthly lease payment is $2,679.
b) The Company has entered into an agreement to lease a vehicle to March 9,
2003. The monthly lease payment is $529 with an option to purchase the
vehicle at the end of the lease for $14,717.
c) The Company has entered into an agreement to lease an internet
telecommunication line to December 31, 2002. The monthly lease payment is
$959.
Unaudited
<PAGE>
Notes to the Interim Consolidated Financial Statements
As at February 29, 2000
- ------------------------------------------------------------------------------
Note 6 - Commitments (continued)
d) The Company has entered into a consulting contract with an individual to
perform various investor relations and corporate development functions for an
initial fee of $4,600, which was settled by the issuance of 200,000 common
shares of the Company at $0.023 per share, and a monthly fee of $2,414. The
contract term commenced on February 29, 2000 and continues until February 28,
2001.
e) The Company has entered into a consulting contract with an individual to
perform various accounting functions for a monthly fee of $1,655. The
contract term commenced on February 15, 2000 and continues until August 15,
2000.
f) The Company has entered into an employment contract with the President of the
Company for an annual salary of $51,738. The employment contract commenced on
February 1, 2000 and continues until January 31, 2003.
g) The Company has entered into an employment contract with the Chief
Information Officer for a signing bonus of $3,450, which was settled by the
issuance of 150,000 common shares of the Company at $0.023 per share, and an
annual salary of $51,738. The employment contract commenced on February 29,
2000 and continues until February 28, 2001.
Note 7 - Financial Instruments
Financial instruments include cash and cash equivalents, accounts receivable,
operating line of credit, and accounts payable and accrued liabilities. The
estimated fair value of such financial instruments approximates their carrying
value.
Unaudited
<PAGE>
Forest Industry Online Inc.
Financial Statements
July 31, 1999 and 1998
(In U.S. $)
Page
Auditors' Report 1
Balance Sheets 2
Statements of Operations 3
and Comprehensive Loss
Statements of Shareholders' Deficit 4
Statements of Cash Flows 5
Notes to the Financial Statements 6-11
1999 1998
$ $
Revenues 300,362 128,685
Expenses 300,903 194,352
Net (Loss) (541) (65,667)
<PAGE>
Auditors' Report
- -----------------------------------------------------------------
To the Directors of:
FOREST INDUSTRY ONLINE INC.
We have audited the Balance Sheets of Forest Industry Online Inc. as at
July 31, 1999 and 1998 and the Statements of Operations, Shareholders'
Deficit and Cash Flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform 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 July 31,
1999 and 1998 and the results of its operations and the changes in its
cash flows for the years then ended in accordance with generally
accepted accounting principles in Canada, which except as disclosed in
Note 16 to the financial statements, also conform in all material
respects with accounting principles generally accepted in the United
States.
"WATSON DAUPHINEE & MASUCH"
Chartered Accountants
Vancouver, B.C., Canada
November 05, 1999
<PAGE>
FOREST INDUSTRY ONLINE INC.
Balance Sheets
AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
1999 1998
$ $
ASSETS
CURRENT
Cash 2,819 2,789
Accounts Receivable (Net of allowance
for Doubtful Accounts 64,657 23,498
1999 - $ 8,630; 1998 - $ 2,978)
Note Receivable - 14,406
Prepaid Expenses 1,795 414
Due from Affiliated Company (Note 3) 166 -
- --------------------------------------------------------------------------
69,437 41,107
Capital (Note 4) 32,481 12,776
- --------------------------------------------------------------------------
101,918 53,883
- --------------------------------------------------------------------------
LIABILITIES
CURRENT
Operating Line of Credit (Note 5) 13,278 -
Accounts Payable and Accrued Liabilities 39,265 34,198
Unearned Revenues 52,281 23,162
Due to Parent Company (Note 6) 50,341 123,055
Due to Shareholders (Note 7) 17,672 -
Demand Bank Loan (Note 8) 55,695 -
- --------------------------------------------------------------------------
228,532 180,415
- --------------------------------------------------------------------------
Commitments (Note 11)
SHAREHOLDERS' DEFICIENCY
Share Capital (Note 9) 1 1
Cumulative Translation Adjustment 1,450 991
Deficit (128,065) (127,524)
- --------------------------------------------------------------------------
(126,614) (126,532)
- --------------------------------------------------------------------------
101,918 53,883
======= ======
Approved on behalf of the Board of the Directors:
"Marc White", Director
"Joe Perraton", Director
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statements of Operations and Comprehensive Loss FOR THE YEARS ENDED JULY 31,
1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
1999 1998
$ $
REVENUES 300,362 128,685
- --------------------------------------------------------------------------
EXPENSES
Advertising and Promotion 2,282 3,164
Depreciation 7,763 3,036
Automobile 540 4,055
Bad Debts 7,782 3,155
Interest 14,534 12,655
Consulting Fees 487 1,898
Insurance, Licenses and Dues 1,827 2,127
Internet and Connecting Fees 8,034 12,869
Office Supplies 11,812 6,200
Printing 11,167 -
Professional Fees 17,592 12,657
Rent, Property Taxes and Utilities 10,150 6,147
Repair and Maintenance 2,222 442
Salaries and Benefits 172,339 95,723
Telephone 13,664 15,610
Trade Shows 7,985 3,513
Travel and Lodging 10,723 11,101
- --------------------------------------------------------------------------
300,903 194,352
- --------------------------------------------------------------------------
NET (LOSS) FOR THE YEAR (541) (65,667)
Translation Adjustment Gain 459 991
- --------------------------------------------------------------------------
COMPREHENSIVE (LOSS) FOR THE YEAR (82) (64,676)
- --------------------------------------------------------------------------
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statements of Shareholders' Deficit
FROM JANUARY 09, 1997 (INCEPTION) TO JULY 31, 1999 (In U.S. $)
- ------------------------------------------------------------------------------
Common Shares Cumulative
Translation Deficit
Shares Amount Adjustment Accumulated Total
# $ $ $ $
- -------------------------------------------------------------------------------
Issuance of Shares for Cash
in January 1997 100 1 - - 1
Net (Loss) from Inception to
July 31, 1997 - - - (61,857) (61,857)
- ------------------------------------------------------------------------------
Balance, July 31, 1997 100 1 - (61,857) (61,856)
Translation Adjustment - - 991 - 991
Net (Loss) for the Year Ended
July 31, 1998 - - - (65,667) (65,667)
- -------------------------------------------------------------------------------
Balance, July 31, 1998 100 1 991 (127,524) (126,532)
Translation Adjustment - - 459 - 459
Net (Loss) for the Year Ended
July 31, 1999 - - - (541) (541)
- ------------------------------------------------------------------------------
Balance, July 31, 1999 100 1 1,450 (128,065) (126,614)
- -------------------------------------------------------------------------------
<PAGE>
FOREST INDUSTRY ONLINE INC.
Statements of Cash Flows
FOR THE YEARS ENDED JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
1999 1998
$ $
CASH WAS PROVIDED FROM, UTILIZED (FOR):
OPERATING ACTIVITIES:
Net (Loss) for the Year (541) (65,667)
Non-Cash Items:
Depreciation 7,763 3,036
Change in Non-Cash Working
Capital Accounts (Note 13) 6,052 15,722
- ---------------------------------------------------------------------------
13,274 (46,909)
FINANCING ACTIVITIES
Bank Loan (net of repayments) 55,695 -
Advances (to) Affiliated Company (166) -
Advances from (to) Parent Company (72,714) 47,406
Advances from (to) Shareholders 17,672 (1,759)
- -------------------------------------------------------------------------------
487 45,647
- -------------------------------------------------------------------------------
INVESTING ACTIVITY
Acquisition of Capital Assets (27,009) (4,120)
- -------------------------------------------------------------------------------
DECREASE IN CASH (13,248) (5,382)
Cash, Beginning of the Year 2,789 8,171
- -------------------------------------------------------------------------------
CASH (BANK INDEBTEDNESS),
END OF THE YEAR (10,459) 2,789
- ------------------------------------------------------------------------------
Cash (Bank Indebtedness) comprised of:
Cash 2,819 2,789
Operating Line of Credit (13,278) -
- -------------------------------------------------------------------------------
(10,459) 2,789
- -------------------------------------------------------------------------------
Supplemental Disclosure
Interest Paid 14,534 12,655
- --------------------------------------------------------------------------
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
Forest Industry Online Inc. ("the Company") was incorporated on January
09, 1997 under the laws of the Province of British Columbia, Canada.
The Company's principal business activities include designing web sites
and operating and maintaining a computer internet web site for
companies associated with the forest industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Capital Assets and Depreciation
Capital assets are recorded at cost. Depreciation is provided for at
the following annual rates on the straight line basis:
Automotive Equipment - 20%
Computer Equipment - 20%
Furniture and Fixtures - 10%
Software - 100%
One half of the above rates are applied in the year of acquisition and
no amortization is taken in the year of disposal.
b) Revenue Recognition and Unearned Revenues
Revenues are recorded on the billed basis. Customers are billed on a
quarterly basis in advance for advertising fees and hosting revenue.
Unearned revenues relate to the period of the billing that has not yet
transpired and therefore not earned.
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 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) Income Taxes
The Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined
based on the difference between financial statement and tax bases of
assets and liabilities and are measured using the enacted tax rates and
laws that are expected to be in effect when the differences are
expected to reverse. Deferred tax assets are reduced by a valuation
allowance in respect of amounts considered by management to be less
likely than not a realization in future periods.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
NOTE 3 - DUE FROM AFFILIATED COMPANY
Amounts due from an affiliated company are unsecured, are non-interest
bearing and have no formal terms of repayment.
1999 1998
$ $
Seaspray Log Scaling Ltd. 166 -
==================
NOTE 4 - CAPITAL ASSETS
Accumulated Net Book Value
Cost Depreciation 1999 1998
$ $ $ $
Automotive Equipment 710 71 639 -
Computer Equipment 35,388 8,846 26,542 12,526
Furniture and Fixture 3,013 175 2,838 100
Software 5,225 2,763 2,462 150
-----------------------------------------------
44,336 11,855 32,481 12,776
================================================
NOTE 5 - OPERATING LINE OF CREDIT
The Company has a $16,600 (CDN$25,000) revolving operating line of
credit with the Royal Bank of Canada. The line of credit is payable on
demand, bears interest at prime plus 1.75% per annum payable monthly,
and is secured by a general security agreement over all the assets of
the Company, guarantees by the corporate shareholder and personal
guarantees of the principals of the Company.
NOTE 6 - DUE TO PARENT COMPANY
Amounts due to parent company, Teaco Properties Ltd. who owns 78% of
the Company, are unsecured and have no specific terms of repayment
except for $49,840 (1998 - $111,152) which bears interest at prime plus
5% per annum. The parent company has indicated that it will not seek
repayment in year 2000.
1999 1998
$ $
Teaco Properties Ltd. 50,341 123,055
=====================
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
NOTE 7 - DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing, unsecured, and
have no specific terms of repayment. The shareholders have indicated
that they will not seek repayment in year 2000.
1999 1998
$ $
17,672 -
=====================
NOTE 8 - DEMAND BANK LOAN
1999 1998
$ $
Demand Bank Loan, Royal Bank 55,695 -
The demand loan is repayable in monthly instalments of $1,992 including
interest at prime plus 2% per annum and is secured by a general
security agreement over all the assets of the Company, guarantees by
the corporate shareholder and personal guarantees of the principals of
the Company.
55,695 -
=======================
NOTE 9 - SHARE CAPITAL
Authorized:
10,000 Class "A" voting common shares with no par value
Issued: 1999 1998
$ $
100 Class "A" voting common shares 1 1
- ------------------------------------------------------------------------------
The shares were issued on January 09, 1997 for cash proceeds of $0.01 per share.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements
AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
NOTE 10 - INCOME TAXES
The Company has non-capital losses available for carry-forward
totalling $129,921. These losses may be carried forward to be applied
against future income for Canadian tax purposes. The losses expire as
follows:
Year $
2004 56,828
2005 72,031
2006 1,062
- -----------------------------------------------------------
129,921
- -----------------------------------------------------------
No future benefit for these losses has been recognized in these
financial statements.
NOTE 11 - COMMITMENTS
A) The Company has entered into an agreement to lease office premise to
March 31, 2000. The monthly lease payment, excluding operating
costs, is $1,007.
B) The Company has entered into an agreement to lease a vehicle to
November 30, 1999. The monthly lease payment is $213 with an option
to purchase the vehicle at the end of the lease for $11,950. The
Company does not plan to exercise the option to purchase the vehicle
when the lease expires.
C) The Company has entered into an agreement to lease an internet
telecommunication line to December 31, 2002. The monthly lease
payment is $863.
NOTE 12 - RELATED PARTY TRANSACTIONS
In addition to those transactions disclosed elsewhere in these
financial statements, the Company had the following transactions with
related parties:
1999 1998
$ $
Salaries paid to shareholders of the 49,410 25,325
Company for management
administration, sales, supervision,
and product development services.
Interest paid to the parent company 9,905 11,031
for funds advanced to the Company.
Professional fees paid to the parent 12,220 8,275
company for accounting services provided.
<PAGE>
FOREST INDUSTRY ONLINE INC.
Notes to the Financial Statements AS AT JULY 31, 1999 AND 1998 (In U.S. $)
- --------------------------------------------------------------------------
NOTE 13 - CHANGE IN NON-CASH WORKING CAPITAL ACCOUNTS
1999 1998
$ $
Accounts Receivable (41,159) (12,870)
Note Receivable 14,406 (14,406)
Prepaid Expenses (1,381) (414)
Accounts Payable and Accrued Liabilities 5,067 20,250
Unearned Revenues 29,119 23,162
-----------------------
6,052 15,722
=======================
NOTE 14 - FINANCIAL INSTRUMENTS
Financial instruments include cash, accounts receivable, due from
affiliated company, operating line of credit, accounts payable and
accrued liabilities, demand bank loan, amounts due to parent company
and shareholders. The estimated fair value of such financial
instruments approximates their carrying value.
NOTE 15 - UNCERTAINTY DUE TO 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. The effects of the Year
2000 Issue may be experienced before, on, or after January 01, 2000,
and, if not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. 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 parties, will be fully resolved.
NOTE 16 - UNITED STATES ACCOUNTING PRINCIPLES
These financial statements have been prepared in accordance with
accounting principles generally accepted in Canada. They do not differ
materially from accounting principles generally accepted in the United
States.
<PAGE>
Forest Industry Online, Inc.
INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2000
<PAGE>
FOREST INDUSTRY ONLINE INC.
BALANCE SHEET
AS AT JANUARY 31, 2000 AND JULY 31, 1999
(Unaudited)
- -------------------------------------------------------------------------------
Jan. 31 July 31,
2000 2000
($U.S.) ($U.S.)
----- -----
ASSETS
CURRENT
Cash $33,096 $2,819
Accounts Receivable
67,327 64,657
Prepaid Expenses
1,911 1,795
Due from Affiliated
Companies -- 166
-------- -----------
102,334 69,437
Capital Assets (Note 3) 48,135 31,031
----------- -----------
$ 150,469 $ 100,468
=========== ===========
LIABILITIES
CURRENT
Operating Line of Credit $13,894 $ 13,278
(Note 4)
Accounts Payable and
Accrued Liabilities 29,845 39,265
Unearned Revenue
58,982 52,281
Loan Payable
39,639 --
Due to Shareholders (Note 5)
18,478 17,672
Current Portion of Bank
Loan (Note 6) 47,695 22,465
------ --------
208,533 144,961
Due to Former Parent Company
(Note 7) 84,032 50,341
Long Term Debt (Note 6)
-- 33,230
------- ----------
292,565 228,532
-------- ----------
SHAREHOLDERS' EQUITY
Share Capital (Note 8) 1 1
Deficit (142,097) 128,065)
----------- -----------
(142,096) (128,064)
----------- -----------
$ 150,469 $ 100,468
=========== ===========
<PAGE>
FOREST INDUSTRY ONLINE INC.
STATEMENT OF INCOME AND DEFICIT
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
(Unaudited)
- -----------------------------------------------------------------------------
For the For the For the
Period Period Period
Aug 1,1999 Aug. 1, 1998 Nov. 1, 1999
to Jan 31, to Jan 31, to Jan 31,
2000 1999 2000
($ U.S.) ($ U.S.) ($ U.S.)
----- ----- -----
REVENUE $ 178,058 $132,542 $95,504
------------ ----------- ----------
EXPENSES
Advertising and promotion 1,609 1,683 1,477
Amortization 5,726 2,474 2,987
Automobile 703 ( 152) 375
Bad Debts 8,257 446 6,214
Bank Charges and Interest 7,330 7,702 3,875
Consulting Fees 2,929 ---- 2,724
Security Exchange Filings/
Registrations 359 ---- 358
Insurance, Licenses, and Dues 1,527 1,506 562
Office Supplies 9,602 5,329 6,062
Printing 1,461 4,640 ----
Professional Fees 15,831 7,066 9,229
Rent, Property Taxes and
Utilities 8,942 3,226 5,182
Repairs and maintenance 735 928 517
Salaries and benefits 98,065 59,959 47,378
Telephone 9,664 5,617 5,254
Trade Shows 3,486 2,894 184
Travel and Lodging 12,414 1,095 7,349
------------ ----------- ----------
188,640 104,413 99,727
------------ ----------- ----------
NET INCOME (LOSS) BEFORE OTHER (10,582) 28,129 ( 4,223)
ITEMS
Foreign Exchange Gain (Loss) ( 3,450) ( 1,369) (1,044)
------------ ----------- ----------
NET INCOME (LOSS) FOR THE PERIOD (14,032) 26,760 ( 5,267)
Deficit, beginning of period (128,065) (127,524) (136,830)
------------ ----------- ----------
DEFICIT, END OF PERIOD $(142,097) $(100,764) $(142,097)
============ =========== ==========
<PAGE>
FOREST INDUSTRY ONLINE INC.
STATEMENT OF CASH FLOW
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
(Unaudited)
-------------------------------------------------------------------------
For the For the For the
Period Period Period
Aug 1,1999 Aug. 1, 1998 Nov. 1, 1999
to Jan 31, to Jan 31, to Jan 31,
2000 1999 2000
($ U.S.) ($ U.S.) ($ U.S.)
----- ----- -----
CASH PROVIDED FROM, UTILIZED
(FOR):
OPERATING ACTIVITIES:
Net Income (Loss) for the Period $ (14,032) $ 26,760 $ (5,267)
Non-Cash Item:
Amortization 5,726 2,474 2,987
Change in Non-Cash Working
Capital Accounts 34,134 (20,328) 24,632
------------ ----------- -----------
25,828 8,906 22,352
------------ ----------- ------------
FINANCING ACTIVITIES
Bank Loan (net of repayments) (8,000) 65,552 ( 4,690)
Advances from (to)
Affiliated Company 166 (84) 531
Advances from (to) Parent
Company 33,691 (64,986) 25,425
Advances from (to)
Shareholders 806 --- 600
------------ ----------- -----------
26,663 482 21,866
------------ ----------- -----------
INVESTING ACTIVITY
Acquisition of Capital Assets (22,830) (11,918) (13,101)
------------ ----------- -----------
DECREASE IN CASH 29,661 ( 2,530) 31,117
Cash (Bank Indebtedness),
Beginning of Period (10,459) 2,789 (11,915)
------------ ----------- -----------
CASH (BANK INDEBTEDNESS), END
OF THE PERIOD $ 19,202 $ 259 $19,202
============ =========== ===========
Cash (Bank Indebtedness)
comprised of:
Cash $ 33,096 10,292 33,096
Operating Line of Credit (13,894) (10,033) (13,894)
------------ ----------- -----------
$ 19,202 $ 259 $ 19,202
============ =========== ===========
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS AT JANUARY 31, 2000
- ----------------------------------------------------------------------
NOTE 1 - NATURE OF OPERATIONS
Foresty Industry Online Inc. ("the company") was incorporated on January 9, 1997
under the laws of the Province of British Columbia. The Company's principal
business activities include designing web sites and operating and maintaining a
computer internet web site for companies associated with the forest industry.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Capital Assets and Amortization
Capital assets are recorded at cost. Amortization is provided for at the
following annual rates on the straight line basis:
Automotive Equipment - 20%
Computer Equipment - 20%
Furniture and Fixtures - 10%
Software - 100%
One half of the above rates are applied in the year of acquisition and no
amortization is taken in the year of disposal.
b) Revenue Recognition and Unearned Revenues
Revenues are recorded on a billed basis. Customers are billed on a quarterly
basis in advance for advertising fees and hosting revenue. Unearned revenues
relate to the period of the billing that has not yet transpired and therefore
not earned.
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 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.
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS AT JANUARY 31, 2000
- ----------------------------------------------------------------------------
NOTE 3 - CAPITAL ASSETS
Net Book Value
Accumulated January 31, July 31,
Cost 2000 1999
Amortization
($ U.S.) ($ U.S.) ($U.S.) ($ U.S.)
Automotive Equipment $ 743 $ 301 $ 442 $ 639
Computer Equipment 54,924 13,297 41,627 25,092
Furniture and Fixtures 4,738 381 4,357 2,838
Software 5,975 4,266 1,709 2,462
66,380 18,245 48,135 $ 31,031
NOTE 4 - OPERATING LINE OF CREDIT
The company has a $ 13,894 (CDN $15,000) revolving operating line of credit with
the Royal Bank of Canada. The line of credit is payable on demand, bears
interest at prime plus 1.75% per annum payable monthly, and is secured by a
general security agreement over all assets of the Company, guarantees by the
corporate shareholder and personal guarantees of the principals of the Company.
The line of credit was paid off in March, 2000 and the general security
agreement as well as the guarantees are being removed.
NOTE 5 - DUE TO SHAREHOLDERS
The amounts due to shareholders are unsecured, non-interest bearing and have no
specific terms of repayment.
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS AT JANUARY 31, 2000
- ----------------------------------------------------------------------
NOTE 6- LONG TERM DEBT
Jan 31, July 31,
2000 1999
($U.S.) ($U.S.)
---------------------------
Demand Bank Loan, Royal Bank
The demand loan is repayable in monthly
instalments of $ 2,084 including interest
at prime plus 2% per annum and is secured
by a general security agreement over all
the assets of the Company, guarantees by
the corporate shareholder and personal
guarantees of the principals of the Company. $47,695 $ 55,695
Less: Current Portion 47,695 22,465
---------------------------
-- $ 33,230
===========================
NOTE 7 - DUE TO FORMER PARENT COMPANY
Jan 31, July 31,
2000 1999
($U.S.) ($U.S.)
---------------------------
Teaco Properties Ltd. $84,032 $ 50,341
============ ============
The amounts due to the former parent company, Teaco Properties Ltd. were
unsecured and had no specific terms of repayment except for $ 83,531 (1999-
$49,840) which called for interest at prime plus 5% per annum.
NOTE 8 - SHARE CAPITAL
Authorized:
10,000 Class "A" voting common shares with no par value
Issued: Jan 31, July 31,
2000 1999
($U.S.) ($U.S.)
---------------------------
100 Class "A" voting common shares $ 1 $ 1
===========================
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS AT JANUARY 31, 2000
- -------------------------------------------------------------------------------
NOTE 9 - INCOME TAXES
The company has non-capital losses available for carry-forward totalling
$135,110. These losses may be carried forward to be applied against future
income for tax purposes. The losses expire as follows:
Year
----
2004 $ 56,782
2005 71,973
2006 6,355
NOTE 10 - COMMITMENTS
A) The Company has entered into an agreement to lease office premises to
September 30, 2001. The monthly lease payment is $ 2,697 ($3,883 CDN).
B) The Company has entered into an agreement to lease a vehicle to March 9,
2003. The monthly lease payment is $ 532 ($767 CDN) with an option to
purchase the vehicle at the end of the lease for $ 14,820 ( $ 21,334 CDN).
C) The Company has entered into an agreement to lease an internet
telecommunication line to December 31, 2002. The monthly lease payment is $
966 ($ 1,391 CDN).
D) The Company has entered into a consulting contract with an individual to
perform various investor relations and corporate development functions. The
contract which commenced on March 1, 2000 and continues until February 28,
2001 stipulated an initial fee of $4,600 which was settled by the issuance of
200,000 shares of the parent company at $.023 per share and a monthly fee of
$ 2,431 ( $3,500 CDN).
E) The Company has entered into a consulting contract with an individual to
perform various accounting functions for a monthly fee of $ 1,667 ($2,400
CDN). The contract term commenced on February 15, 2000 and continues until
August 15, 2000.
F) The Company has entered into a employment contract with the President of the
Company. The employment contract commenced on February 1, 2000 and continues
until January 31, 2003 for an annual salary of $ 52,101 ($75,000 CDN).
G) The Company has entered into a employment contract with the Chief Information
Officer. The employment contract commenced on March 1, 2000 and continues
until February 28, 2001 and stipulated a signing bonus of $3,450 which was
settled by the issuance of 150,000 shares of the parent company at $.023 per
share and an annual salary of $ 52,101 ($75,000 CDN).
H) On March 1, 2000, the parent company established an employee stock option
plan for the employees of the Forest Industry Online Inc. The total number of
options granted under the stock option plan are 31,000 shares with exercise
price of $ 4.00 vesting on February 29, 2001.
<PAGE>
FOREST INDUSTRY ONLINE INC.
NOTES TO THE FINANCIAL STATEMENTS
AS AT JANUARY 31, 2000
----------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENTS
On January 31, 2000, the company was officially acquired under a reverse
takeover by Autoeye, Inc. (a publicly traded OTC company). On February 1, 2000,
the new parent company loaned Forest Industry Online Inc. the sum of $750,000
which was used to retire the amounts owing to the shareholders, Teaco Properties
Ltd. and the current loan payable.
NOTE 12 - CHANGE IN NON-CASH WORKING CAPITAL ACCOUNTS
For the For the For the
Period Period Period
Aug 1,1999 Aug. 1, 1998 Nov. 1, 1999
to Jan 31, to Jan 31, to Jan 31,
2000 1999 2000
($ U.S.) ($ U.S.) ($ U.S.)
----- ----- -----
Accounts Receivable $ ( 2,670) $ (19,660) $ ( 2,371)
Notes Receivable -- 14,406 --
Prepaid Expenses ( 116) 180 ( 1,672)
Accounts Payable and Accrued (9,420) (15,503) ( 10,780)
Liabilities
Unearned Revenues 6,701 249 ( 184)
Loan Payable 39,639 -- 39,639
------------------------------------------
$ 34,134 (20,328) 24,632
==========================================
NOTE 13 - FINANCIAL INSTRUMENTS
Financial instruments include cash, accounts receivable, due from affiliated
company, operating line of credit, accounts payable and accrued liabilities,
long term debt, amounts due to parent company and shareholders. The estimated
fair value of such financial instruments approximates their carrying value.
<PAGE>
forestindustry.com, Inc.
(formerly Autoeye Inc.)
Pro Forma Combined Statements of Operations
PREPARED BY MANAGEMENT
(In U.S. $)
For the Nine Months Ended February 29, 2000 and the Year Ended May 31, 1999
<PAGE>
Pro Forma Combined Statement of Operations For the Nine Months Ended February
29, 2000 (In U.S. $)
- ------------------------------------------------------------------------------
Pro forma
--------------------------
The Forest Forestindustry. Acquisition Combined
Industry com, Inc. Adjustments
Online Inc. (Note 2)
$ $ $ $
REVENUES 264,144 - - 264,144
---------------------------------------------------
EXPENSES
Administrative and selling 198,672 11,789 - 210,461
Wages and Benefits 169,158 - - 169,158
---------------------------------------------------
367,830 11,789 - 379,619
---------------------------------------------------
NET LOSS FOR THE PERIOD 103,686 11,789 - 115,475
---------------------------------------------------
Basic and diluted loss
per share (0.01)
==========
Unaudited - "See accompanying notes to the pro forma combined financial
statements".
<PAGE>
Pro Forma Combined Statement of Operations For the Year Ended May 31, 1999 (In
U.S. $)
- ------------------------------------------------------------------------------
Pro forma
--------------------------
The Forest Forestindustry Acquisition Combined
Industry .com, Inc. Adjustments
Online Inc. (Note 2)
$ $ $ $
REVENUES 302,313 -- -- 302,313
------------------------------------------------------------
EXPENSES
Advertising and Promotion 1,826 - - 1,826
Bad Debts 5,048 - - 5,048
Bank Charges and Interest 16,322 - - 16,322
Consulting Fees 2,365 - - 2,365
Depreciation 5,389 - - 5,389
Office 10,955 - - 10,955
Printing 4,767 - - 4,767
Professional Fees 17,712 9,752 - 27,464
Rent and Utilities 8,662 - - 8,662
Telephone and Internet 30,673 - - 30,673
Connecting Fees
Travel 10,038 - - 10,038
Trade Shows 2,592 - - 2,592
Wages and Benefits 171,101 - - 171,101
---------------------------------------------------
287,450 9,752 - 297,202
---------------------------------------------------
NET INCOME (LOSS)
FOR THE YEAR 14,863 (9,752) - 5,111
---------------------------------------------------
Basic Earnings per share -
-------------
Unaudited - "See accompanying notes to the pro forma combined financial
statements".
<PAGE>
Notes to the Pro Forma Combined Statement of Operations
For the Nine Months Ended February 29, 2000 and Year Ended May 31, 1999
- ------------------------------------------------------------------------------
Note 1 - General
The unaudited pro forma combined statements of operations of forestindustry.com,
Inc. (the "Company") have been compiled from and include:
(a) the audited balance sheets of forestindustry.com, Inc. (formerly Autoeye
Inc.) as at May 31, 1999 and 1998 and the audited statements of operations,
stockholders' equity and cash flows for the periods then ended;
(b) the audited balance sheets of The Forest Industry Online Inc. (Forest) as
at July 31, 1999 and 1998 and the audited statements of operations,
stockholders' deficit and cash flows for the years then ended; and
(c) the unaudited balance sheet of the Company as at February 29, 2000 and the
unaudited statements of operations and cash flows for the periods ended
February 29, 2000 and February 28, 1999.
For more detailed information, readers should refer to the financial statements
of the Company and Forest included elsewhere in this Registration Statement.
The unaudited pro forma combined statements of operations give effect to the
transactions described in note 2 below. The pro forma combined statements of
operations have been presented as though the transactions occurred on June 01,
1998.
The pro forma combined statements of operations may not necessarily be
indicative of the results and financial position which would have resulted had
the transactions been effected on the date indicated above. Further, the pro
forma financial information is not necessarily indicative of the financial
position that may be attained in the future.
Note 2 - Basis of Presentation
On January 31, 2000, the Company merged with Forest. The acquisition was a
reverse takeover with Forest being the deemed accounting acquiror for financial
statement purposes.
Under the terms of agreement, the Company issued 10,000,000 common shares for
all of the 100 common issued and outstanding shares of Forest. As at January 31,
2000, there were 4,927,040 common shares of the Company (after reflecting a 21:1
stock consolidation which
<PAGE>
Notes to the Pro Forma Combined Statement of Operations
For the Nine Months Ended February 29, 2000 and Year Ended May 31, 1999
- -----------------------------------------------------------------------------
Note 2 - Basis of Presentation (cont'd)
occurred on August 20, 1999 and a subsequent stock split of 1:40 which occurred
on August 21, 1999). The acquisition was accounted for as a recapitalization
representing an issue of shares by Forest for the net assets of the Company. On
January 31, 2000 the net assets of the Company consisted of:
Cash and Cash Equivalents $ 750,000
Accounts Payable (19,703)
------------
$ 730,297
Total costs related to this recapitalization transaction were estimated at
$15,863. They include cash expense in the estimated amount of $15,000 and
non-cash expense in the amount of $863. The non-cash expense relates to the
issuance of 37,500 shares of common stock of the Company. The fair value of
these services was estimated based upon the estimated fair value of the shares
at $0.023 per share. Total transaction costs have been recorded as a charge to
the stockholders' equity of the Company.
Cash and cash equivalents held by the Company in the amount of $750,000 were
obtained through subscriptions for a private placement of 750 shares of Series
"A" Convertible Preferred Stock at a price of $1,000 per share. The closing of
this private placement and the release of funds held in escrow were contingent
on this acquisition being completed. The shares of Series "A" preferred stock
are convertible, at the option of the holder, and at any time after March 16,
2000, into common stock at 75% of the last ten day average closing bid price of
the Company subject to a maximum conversion rate of 5,000 shares of common stock
for one share of preferred stock and a minimum conversion rate of 250 shares of
common stock for one share of preferred stock. In addition, if a registration
statement in respect of the common stock underlying the preferred stock is
effective, all Series "A" preferred stocks will be deemed to convert into common
stock on or before January 31, 2001, the first anniversary date.
The pro forma combined statements of operations combine the operations of
forestindustry.com, Inc. for the nine months ended February 29, 2000 and year
ended May 31, 1999 as if the acquisition of forestindustry.com, Inc. had taken
place on June 01, 1998. There were no pro forma adjustments required in
combining the information of these two entities. This pro forma information does
not reflect any non-recurring charges or credits directly attributable to the
transaction. This pro forma information does not purport to be indicative of the
revenues and net loss that could have resulted had the acquisition been in
effect for the period presented and is not intended to be a projection of future
results or trends.
<PAGE>
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY .........................................................
RISK FACTORS ..............................................................
DILUTION AND COMPARATIVE SHARE DATA ........................................
MARKET FOR OUR COMMON STOCK ................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS
AND PLAN OF OPERATION.....................................................
MANAGEMENT .................................................................
PRINCIPAL SHAREHOLDERS.....................................................
SELLING STOCKHOLDERS .....................................................
DESCRIPTION OF SECURITIES ...................................................
LEGAL PROCEEDINGS..........................................................
.........................
EXPERTS ...................................................................
INDEMNIFICATION ............................................................
AVAILABLE INFORMATION........................................................
FINANCIAL STATEMENTS............................................................
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this prospectus, and
if given or made, such information or representations must not be relied upon as
having been authorized by forestindustry.com. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, any of the
securities offered in any jurisdiction to any person to whom it is unlawful to
make such an offer in such jurisdiction. Neither the delivery of this prospectus
nor any sale made in this prospectus shall, under any circumstances, create any
implication that the information in this prospectus is correct as of any time
subsequent to the date of this prospectus or that there has been no change in
the affairs of forestindustry.com since such date.
Until _________, 2000 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
<PAGE>
PART II
Information Not Required in Prospectus
Item 24. Indemnification of Officers and Directors The Delaware General
Corporation Law and the Company's Certificate of Incorporation and Bylaws
provide that we may indemnify any and all of our officers, directors, employees
or agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined to not have acted in good faith and in our best
interest.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by us in
connection with the issuance and distribution of the securities being registered
hereunder. No expenses shall be borne by the selling stockholder. All of the
amounts shown are estimates, except for the SEC Registration Fees.
SEC Filing Fee $ 354
NASD Filing Fee 500
Blue Sky Fees and Expenses 2,000
Printing and Engraving Expenses 200
Legal Fees and Expenses 25,000
Accounting Fees and Expenses 15,000
Miscellaneous Expenses 1,946
--------
TOTAL $45,000
=======
All expenses other than the SEC and NASD filing fees are estimated.
Item 26. Recent Sales of Unregistered Securities.
The following information sets forth all securities which have
been sold by us and which securities were not registered under the Securities
Act of 1933, as amended. Unless otherwise indicated, the consideration paid for
the shares was cash. All historical share data in this prospectus has been
adjusted to reflect the various recapitalizations of our common stock. See
"Description of Securities" for a complete history of the recapitalizations of
our common stock.
<PAGE>
Common Stock
Number of Shares
Date of Sale Name of Common Stock Consideration
- ------------ ---- ------------- ------------
December 10, 1997 Bona Vista West $5,000
Ltd. 5,000,000
December 11, 1997 Bona Vista West $10
Ltd. 100
January 9, 1998 Holders of Series 175,456 175,456 shares of
"H" common stock Series "H" common
of STB Corp. stock of STB Corp.
valued at $175
January 31, 2000 Teaco Properties 69 shares of The
Ltd. 6,900,000 Forest Industry
Online Inc.
January 31, 2000 Joe Perraton 24 shares of The
2,400,000 Forest Industry
Online Inc.
January 31, 2000 Lara Perraton 7 shares of The
700,000 Forest Industry
Online Inc.
January 31, 2000 Century Capital Services valued at
Management Ltd. 37,500 $862.50
February 24, 2000 Todd Hilditch Services valued at
200,000 $4,600.00
February 29, 2000 John Carmichael Services valued at
150,000 $3,450.00
Series A Convertible Preferred stock
Number of Shares of
Series A Convertible
Date of Sale Name preferred stock Consideration
- ------------ ---- ------------- ---------------
January 31, 2000 Indentures of
Trust, James F. 125 $125,000
Cool
January 31, 2000 Augustine Fund LP 250 $250,000
January 31, 2000 Ascent Financial
Incorporated 375 $375,000
<PAGE>
The sales of our common stock prior to January 31, 2000 were exempt from
registration pursuant to Rule 504 of the Securities and Exchange Commission. All
shares of common stock sold on or after January 31, 2000 are "restricted"
securities as defined in Rule 144 of the Rules and Regulations of the Securities
and Exchange Commission. The certificates evidencing the restricted shares of
common stock bear legends stating that the shares represented by the
certificates may not be offered, sold or transferred other than pursuant to an
effective registration statement under the Securities Act of 1933, or pursuant
to an applicable exemption from registration.
The shares of common stock issued or sold subsequent to January 30, 2000
were issued or sold in reliance upon the exemption provided by Section 4(2) of
the Act. The persons who acquired these shares were either accredited or
sophisticated investors. The shares of common stock were acquired for investment
purposes only and without a view to distribution. The persons who acquired these
shares were fully informed and advised about matters concerning us, including
our business, financial affairs and other matters. The persons acquired these
shares for their own accounts. The certificates representing these shares of
common stock bear legends stating that the shares may not be offered, sold or
transferred other than pursuant to an effective registration statement under the
Securities Act of 1933, or pursuant to an applicable exemption from
registration. The shares are "restricted" securities as defined in Rule 144 of
the Securities and Exchange Commission.
All sales of the Company's Series A preferred stock were exempt from
registration pursuant to Rule 506 of the Securities and Exchange Commission. All
shares of the preferred stock were acquired for investment purposes only and
without a view to distribution. All of the persons who acquired the Company's
Series A preferred stock were fully informed and advised about matters
concerning us, including our business, financial affairs and other matters. The
purchasers of the Company's Series A preferred stock acquired the securities for
their own accounts. The certificates evidencing the Series A preferred stock
bear legends stating that they may not be offered, sold or transferred other
that pursuant to an effective registration statement under the Securities Act of
1933, or pursuant to an applicable exemption from registration. All Series A
preferred shares are "restricted" securities as defined in Rule 144 of the Rules
and Regulations of the Securities and Exchange Commission.
Item 27. Exhibits
The following Exhibits are filed with this prospectus:
Exhibits Page Number
1 Underwriting Agreement N/A
----------------------
3.1 Certificate of Incorporation and Amendments
--------------------------
3.3 Bylaws
--------------------------
4.1 Certificate of Designation of Series A
preferred stock
--------------------------
<PAGE>
4.2 Stock Option Plan _____________
5 Opinion of Counsel
--------------------------
10 Share Exchange Agreement
--------------------------
23.1 Consent of Hart and Trinen
--------------------------
23.2 Consent of Ernst & Young LLP
--------------------------
23.3 Consent of Watson, Dauphinee & Masuch _____________
24. Power of Attorney Included as part of the
Signature Page
27. Financial Data Schedules ___________________
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by Section l0(a)(3) of the Securities
Act of l933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii)To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement,
including (but not limited to) any addition or deletion of a managing
underwriter.
(2) That, for the purpose of determining any liability under the
Securities Act of l933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
<PAGE>
(4) To provide to the Underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of l933 may be permitted to directors, officers and controlling
persons of the Registrant, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears below hereby
authorizes the agent for service named in this Registration Statement, with full
power to act alone, to file one or more amendments (including post-effective
amendments) to this Registration Statement, which amendments may make such
changes in this Registration Statement as such agent for service deems
appropriate, and the Registrant and each such person hereby appoints such agent
for service as attorney-in-fact, with full power to act alone, to execute in the
name and in behalf of the Registrant and any such person, individually and in
each capacity stated below, any such amendments to this Registration Statement.
SIGNATURES
Pursuant to the requirements of the Securities Act of l933, the
Registrant has duly caused this Registration Statement to be signed on our
behalf by the undersigned, thereunto duly authorized, in Vancouver, British
Columbia, on the _____ day of May, 2000.
FORESTINDUSTRY.COM, INC.
By /s/ Joe Perraton
--------------------------------
Joe Perraton, President
Pursuant to the requirements of the Securities Act of l933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Title Date
/s/ Joe Perraton
Joe Perraton Director May __, 2000
/s/ Marc Ralph White
Marc Ralph White Director May __, 2000
<PAGE>
forestindustry.com, Inc.
REGISTRATION STATEMENT
ON FORM SB-2
EXHIBITS
CERTIFICATE OF INCORPORATION
OF
AUTOEYE INC.
The undersigned natural, adult person, acting as incorporator of a
corporation (hereinafter usually referred to as the "Corporation") pursuant to
the provisions of the Delaware Corporation Law, hereby adopts the following
Certificate of Incorporation for said Corporation:
ARTICLE I
Name
The name of the Corporation shall be Autoeye Inc.
ARTICLE II
Duration
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purpose
The purpose for which the Corporation is organized is to transact any
or all lawful business for which corporations may be incorporated pursuant to
the Delaware Corporation Law.
ARTICLE IV
Capital Stock
The authorized capital stock of the Corporation shall consist of
30,000,000 shares of common stock, $0.0001 par value, and 5,000,000 shares of
preferred stock, $0.0001 par value.
ARTICLE V
Preferences, Limitations,
and Relative Rights of
Capital Stock
No share of the common stock shall have any preference over or
limitation in respect to any other share of such common stock. All shares of
common stock shall have equal rights and privileges, including the following:
1. All shares of common stock shall share equally in dividends. Subject
to the applicable provisions of the laws of this State, the Board of Directors
of the Corporation may, from time to time, declare and the Corporation may pay
dividends in cash, property, or its own shares, except when the Corporation is
insolvent or when the payment thereof would render the Corporation insolvent or
when the declaration or payment thereof would be contrary to any restrictions
<PAGE>
contained in this Certificate of Incorporation. When any dividend is paid or any
other distribution is made, in whole or in part, from sources other than
unreserved and unrestricted earned surplus, such dividend or distribution shall
be identified as such, and the source and amount per share paid from each source
shall be disclosed to the stockholder receiving the same concurrently with the
distribution thereof and to all other stockholders not later than six months
after the end of the Corporation's fiscal year during which such distribution
was made.
2. All shares of common stock shall share equally in distributions in
partial liquidation. Subject to the applicable provisions of the laws of this
State, the Board of Directors of the Corporation may distribute, from time to
time, to its stockholders in partial liquidation, out of stated capital or
capital surplus of the Corporation, a portion of its assets in cash or property,
except when the Corporation is insolvent or when such distribution would render
the Corporation insolvent. Each such distribution, when made, shall be
identified as a distribution in partial liquidation, out of stated capital or
capital surplus, and the source and amount per share paid from each source shall
be disclosed to all stockholders of the Corporation concurrently with the
distribution thereof. Any such distribution may be made by the Board of
Directors from stated capital without the affirmative vote of any stockholders
of the Corporation.
3. Each outstanding share of common stock shall be entitled to one vote
at stockholders' meetings, either in person or by proxy.
(b) The designations, powers, rights, preferences, qualifications,
restrictions and limitations of the preferred stock shall be established from
time to time by the Corporation's Board of Directors, in accordance with the
Delaware Corporation Law.
(c) 1. Cumulative voting shall not be allowed in elections of directors or for
any purpose.
2. No holders of shares of capital stock of the Corporation shall
be entitled, as such, to any preemptive or preferential right to subscribe to
any unissued stock or any other securities which the Corporation may now or
hereafter be authorized to issue. The Board of Directors of the Corporation,
however, in its discretion by resolution, may determine that any unissued
securities of the Corporation shall be offered for subscription solely to the
holders of common stock of the Corporation, or solely to the holders of any
class or classes of such stock, which the Corporation may now or hereafter be
authorized to issue, in such proportions based on stock ownership as said board
in its discretion may determine.
3. The Board of Directors may restrict the transfer of any of the
Corporation's stock issued by giving the Corporation or any stockholder "first
right of refusal to purchase" the stock, by making the stock redeemable, or by
restricting the transfer of the stock under such terms and in such manner as the
directors may deem necessary and as are not inconsistent with the laws of this
State. Any stock so restricted must carry a conspicuous legend noting the
restriction and the place where such restriction may be found in the records of
the Corporation.
<PAGE>
4. The judgment of the Board of Directors as to the adequacy of
any consideration received or to be received for any shares, options, or any
other securities which the Corporation at any time may be authorized to issue or
sell or otherwise dispose of shall be conclusive in the absence of fraud,
subject to the provisions of these Articles of Incorporation and any applicable
law.
ARTICLE VI
Registered Agent
The name and address of the Corporation's initial registered agent
shall be:
The Company Corporation
1313 North Market Street
New Castle County
Wilmington, Delaware 19801-1151
The Board of Directors, however, from time to time may establish such
other offices, branches, subsidiaries, or divisions which it may consider to be
advisable.
ARTICLE VII
Directors
The affairs of the Corporation shall be governed by a board of not less
than one (1) director, who shall be elected in accordance with the Bylaws of the
Corporation. Subject to such limitation, the number of directors shall be fixed
by or in the manner provided in the Bylaws of the Corporation, as may be amended
from time to time. The organization and conduct of the board shall be in
accordance with the following:
l. The name and address of the initial Director, who shall hold office
until the first annual meeting of the stockholders of the Corporation or until
his successor shall have been elected and qualified, is:
Name Address
-------------------------------------------------------------
Randy S. Malkewich 910 7th Ave. S.W. #510
Calgary, Alberta, Canada T2P-3N8
2. The directors of the Corporation need not be residents of Delaware
and shall not be required to hold shares of the Corporation's capital stock.
3. Meetings of the Board of Directors, regular or special, may be held
within or without Delaware upon such notice as may be prescribed by the Bylaws
of the Corporation. Attendance of a director at a meeting shall constitute a
<PAGE>
waiver by him of notice of such meeting unless he attends only for the express
purpose of objecting to the transaction of any business thereat on the ground
that the meeting is not lawfully called or convened.
4. A majority of the number of directors at any time constituting the
Board of Directors shall constitute a quorum for the transaction of business.
5. By resolution adopted by a majority of the Directors at any time
constituting the Board of Directors, the Board of Directors may designate two or
more directors to constitute an Executive Committee or one or more other
committees each of which shall have and may exercise, to the extent permitted by
law or in such resolution, all the authority of the Board of Directors in the
management of the Corporation; but the designation of any such committee and the
delegation of authority thereto shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed on it or him by
law.
6. Any vacancy in the Board of Directors, however caused or created,
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
and until his successor is duly elected and qualified.
ARTICLE VIII
Officers
The officers of the Corporation shall be prescribed by the Bylaws of
this Corporation.
ARTICLE IX
Meetings of Stockholders
Meetings of the stockholders of the Corporation shall be held at such
place within or without Delaware and at such times as may be prescribed in the
Bylaws of the Corporation. Special meetings of the stockholders of the
Corporation may be called by the President of the Corporation, the Board of
Directors, or by the record holder or holders of at least ten percent (l0%) of
all shares entitled to vote at the meeting. At any meeting of the stockholders,
except to the extent otherwise provided by law, a quorum shall consist of a
majority of the shares entitled to vote at the meeting; and, if a quorum is
present, the affirmative vote of the majority of shares represented at the
meeting and entitled to vote thereat shall be the act of the stockholders unless
the vote of a greater number is required by law.
ARTICLE X
Voting
When, with respect to any action to be taken by stockholders of this
Corporation, the laws of Delaware requires the affirmative vote of the holders
of more than a majority of the outstanding shares entitled to vote thereon, or
of any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action.
<PAGE>
ARTICLE XI
Bylaws
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the stockholders, the power
to alter, amend, or repeal the Bylaws or to adopt new Bylaws shall be vested in
the Board of Directors.
ARTICLE XII
Transactions with Directors and
Other Interested Parties
No contract or other transaction between the Corporation and any other
corporation, whether or not a majority of the shares of the capital stock of
such other corporation is owned by the Corporation, and no act of the
Corporation shall in any way be affected or invalidated by the fact that any of
the directors of the Corporation are pecuniarily or otherwise interested in, or
are directors or officers of, such other corporation. Any director of the
corporation, individually, or any firm with which such director is affiliated
may be a party to or may be pecuniarily or otherwise interested in any contract
or transaction of the Corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of the Corporation, or a majority thereof, at or before the
entering into such contract or transaction; and any director of the Corporation
who is also a director or officer of such other corporation, or who is so
interested, may be counted in determining the existence of a quorum at any
meeting of the Board of Directors of the Corporation which shall authorize such
contract or transaction, with like force and effect as if he were not such
director or officer of such other corporation or not so interested.
ARTICLE XIII
Limitation of Director Liability
and Indemnification
No director of the Corporation shall have liability to the Corporation
or to its stockholders or to other security holders for monetary damages for
breach of fiduciary duty as a director; provided, however, that such provisions
shall not eliminate or limit the liability of a director to the Corporation or
to its shareholders or other security holders for monetary damages for: (i) any
breach of the director's duty of loyalty to the Corporation or to its
shareholders or other security holders; (ii) acts or omissions of the director
not in good faith or which involve intentional misconduct or a knowing violation
of the law by such director; (iii) acts by such director as specified by the
Delaware Corporation Law; or (iv) any transaction from which such director
derived an improper personal benefit.
<PAGE>
No officer or director shall be personally liable for any injury to
person or property arising out of a tort committed by an employee of the
Corporation unless such officer or director was personally involved in the
situation giving rise to the injury or unless such officer or director committed
a criminal offense. The protection afforded in the preceding sentence shall not
restrict other common law protections and rights that an officer or director may
have.
The word "director" shall include at least the following, unless
limited by Delaware law: an individual who is or was a director of the
Corporation and an individual who, while a director of a Corporation is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee or agent of any other foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee benefit plan. A
director shall be considered to be serving an employee benefit plan at the
Corporation's request if his duties to the Corporation also impose duties on or
otherwise involve services by him to the plan or to participants in or
beneficiaries of the plan. To the extent allowed by Delaware law, the word
"director" shall also include the heirs and personal representatives of all
directors.
This Corporation shall be empowered to indemnify its officers and
directors to the fullest extent provided by law, including but not limited to
the provisions set forth in the Delaware Corporation Law, or any successor
provision.
ARTICLE XIII
Incorporator
The name and address of the incorporator of the Corporation is as
follows:
Name Address
------------------------------------------------------------
William T. Hart 1624 Washington Street
Denver, CO 80203
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed
his signature on the 5th day of December, 1997.
William T. Hart
<PAGE>
AUTOEYE, Inc.
Amendment
to the
Certificate of Incorporation
Pursuant to the provisions of the Delaware General Corporation Law,
Autoeye, Inc. adopts the following Amendment to its Certificate of
Incorporation:
The following amendment was adopted on February 25, 2000. Such amendment
was adopted by a vote of the shareholders. Notice of the Meeting of Shareholders
at which the amendment was adopted was given in accordance with Section 222 of
the Delaware General Corporation Law. The number of shares voted for the
amendment was sufficient for approval pursuant to Section 242 of the Delaware
General Corporation Law.
Amendment
Article I of the Certificate of Incorporation is amended to read as
follows:
The name of the Corporation is forestindustry.com Inc.
AUTOEYE, Inc.
By ___________________________
Date: February 25, 2000 Andrew Hromyk
Secretary and a Director
BYLAWS
OF
AUTOEYE INC.
ARTICLE I
OFFICES
Section l. Offices:
- -------------------
The principal office of the Corporation shall be determined by the
Board of Directors, and the Corporation shall have other offices at such places
as the Board of Directors may from time to time determine.
ARTICLE II
STOCKHOLDER'S MEETINGS
Section l. Place:
- -----------------
The place of stockholders' meetings shall be the principal office of
the Corporation unless some other place shall be determined and designated from
time to time by the Board of Directors.
Section 2. Annual Meeting:
- --------------------------
The annual meeting of the stockholders of the Corporation for the
election of directors to succeed those whose terms expire, and for the
transaction of such other business as may properly come before the meeting,
shall be held each year on a date to be determined by the Board of Directors.
Section 3. Special Meetings:
- ----------------------------
Special meetings of the stockholders for any purpose or purposes may be
called by the President, the Board of Directors, or the holders of ten percent
(l0%) or more of all the shares entitled to vote at such meeting, by the giving
of notice in writing as hereinafter described.
Section 4. Voting:
- ------------------
At all meetings of stockholders, voting may be viva voce; but any
qualified voter may demand a stock vote, whereupon such vote shall be taken by
ballot and the Secretary shall record the name of the stockholder voting, the
number of shares voted, and, if such vote shall be by proxy, the name of the
<PAGE>
proxy holder. Voting may be in person or by proxy appointed in writing, manually
signed by the stockholder or his duly authorized attorney infact. No proxy shall
be valid after eleven months from the date of its execution, unless otherwise
provided therein.
Each stockholder shall have such rights to vote as the Articles of
Incorporation provide for each share of stock registered in his name on the
books of the Corporation, except where the transfer books of the Corporation
shall have been closed or a date shall have been fixed as a record date, not to
exceed, in any case, fifty (50) days preceding the meeting, for the
determination of stockholders entitled to vote. The Secretary of the Corporation
shall make, at least ten (l0) days before each meeting of stockholders, a
complete list of the stockholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten (l0) days prior
to such meeting, shall be kept on file at the principal office of the
Corporation and shall be subject to inspection by any stockholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
stockholder during the whole time of the meeting.
Section 5. Order of Business:
- -----------------------------
The order of business at any meeting of stockholders shall be as
follows:
l. Calling the meeting to order.
2. Calling of roll.
3. Proof of notice of meeting.
4. Report of the Secretary of the stock represented at the meeting and the
existence or lack of a quorum.
5. Reading of minutes of last previous meeting and disposal of any unapproved
minutes.
6. Reports of officers.
7. Reports of committees.
8. Election of directors, if appropriate.
9. Unfinished business.
l0. New business.
ll. Adjournment.
<PAGE>
l2. To the extent that these Bylaws do not apply, Roberts' Rules of Order shall
prevail.
ARTICLE III
BOARD OF DIRECTORS
Section l. Organization and Powers:
The Board of Directors shall constitute the policy-making or legislative
authority of the Corporation. Management of the affairs, property, and business
of the Corporation shall be vested in the Board of Directors, which shall
consist of not less than one nor more than ten members, who shall be elected at
the annual meeting of stockholders by a plurality vote for a term of one (l)
year, and shall hold office until their successors are elected and qualify.
Directors need not be stockholders. Directors shall have all powers with respect
to the management, control, and determination of policies of the Corporation
that are not limited by these Bylaws, the Articles of Incorporation, or by
statute, and the enumeration of any power shall not be considered a limitation
thereof.
Section 2. Vacancies:
- ---------------------
Any vacancy in the Board of Directors, however caused or created, shall
be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board, or at a special meeting of the
stockholders called for that purpose. The directors elected to fill vacancies
shall hold office for the unexpired term and until their successors are elected
and qualify.
Section 3. Regular Meetings:
- ----------------------------
A regular meeting of the Board of Directors shall be held, without
other notice than this Bylaw, immediately after and at the same place as the
annual meeting of stockholders or any special meeting of stockholders at which a
director or directors shall have been elected. The Board of Directors may
provide by resolution the time and place, either within or without the State of
Delaware, for the holding of additional regular meetings without other notice
than such resolution.
Section 4. Special Meetings:
- ----------------------------
Special meetings of the Board of Directors may be held at the principal
office of the Corporation, or such other place as may be fixed by resolution of
the Board of Directors for such purpose, at any time on call of the President or
of any member of the Board, or may be held at any time and place without notice,
by unanimous written consent of all the members, or with the presence and
participation of all members at such meeting. A resolution in writing signed by
all the directors shall be as valid and effectual as if it had been passed at a
meeting of the directors duly called, constituted, and held.
<PAGE>
Section 5. Notices:
- -------------------
Notices of both regular and special meetings, save when held by
unanimous consent or participation, shall be mailed by the Secretary to each
member of the Board not less than three days before any such meeting and notices
of special meetings may state the purposes thereof. No failure or irregularity
of notice of any regular meeting shall invalidate such meeting or any proceeding
thereat.
Section 6. Quorum and Manner of Acting:
- ---------------------------------------
A quorum for any meeting of the Board of Directors shall be a majority
of the Board of Directors as then constituted. Any act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors. Any action of such majority, although not at a regularly
called meeting, and the record thereof, if assented to in writing by all of the
other members of the Board, shall always be as valid and effective in all
respects as if otherwise duly taken by the Board of Directors.
Section 7. Executive Committee:
- -------------------------------
The Board of Directors may by resolution of a majority of the Board
designate two (2) or more directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors in the management of the
Corporation; but the designation of such committee and the delegation of
authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed on it or him by law.
Section 8. Order of Business:
- -----------------------------
The order of business at any regular or special meeting of the Board of
Directors, unless otherwise prescribed for any meeting by the Board, shall be as
follows:
l. Reading and disposal of any unapproved minutes.
2. Reports of officers and committees.
3. Unfinished business.
4. New business.
5. Adjournment.
6. To the extent that these Bylaws do not apply, Roberts' Rules of Order shall
prevail.
<PAGE>
Section 9. Remuneration:
No stated salary shall be paid to directors for their services as such,
but, by resolution of the Board of Directors, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board. Members of special or standing committees may be allowed
like compensation for attending meetings. Nothing herein contained shall be
construed to preclude any director from receiving compensation for serving the
Corporation in any other capacity, subject to such resolutions of the Board of
Directors as may then govern receipt of such compensation.
ARTICLE IV
OFFICERS
Section l. Titles:
- ------------------
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, and a Treasurer, who shall be elected by the
directors at their first meeting following the annual meeting of stockholders.
Such officers shall hold office until removed by the Board of Directors or until
their successors are elected and qualify. The Board of Directors may appoint
from time to time such other officers as it deems desirable who shall serve
during such terms as may be fixed by the Board at a duly held meeting. The
Board, by resolution, shall specify the titles, duties and responsibilities of
such officers.
Section 2. President:
- ---------------------
The President shall preside at all meetings of stockholders and, in the
absence of a, or the, Chairman of the Board of Directors, at all meetings of the
directors. He shall be generally vested with the power of the chief executive
officer of the Corporation and shall countersign all certificates, contracts,
and other instruments of the Corporation as authorized by the Board of Directors
or required by law. He shall make reports to the Board of Directors and
stockholders and shall perform such other duties and services as may be required
of him from time to time by the Board of Directors.
Section 3. Vice President:
- --------------------------
The Vice President shall perform all the duties of the President if the
President is absent or for any other reason is unable to perform his duties and
shall have such other duties as the Board of Directors shall authorize or
direct.
Section 4. Secretary:
- ---------------------
The Secretary shall issue notices of all meetings of stockholders and
directors, shall keep minutes of all such meetings, and shall record all
proceedings. He shall have custody and control of the corporate records and
books, excluding the books of account, together with the corporate seal. He
<PAGE>
shall make such reports and perform such other duties as may be consistent with
his office or as may be required of him from time to time by the Board of
Directors.
Section 5. Treasurer:
- ---------------------
The Treasurer shall have custody of all moneys and securities of the
Corporation and shall have supervision over the regular books of account. He
shall deposit all moneys, securities, and other valuable effects of the
Corporation in such banks and depositories as the Board of Directors may
designate and shall disburse the funds of the Corporation in payment of just
debts and demands against the Corporation, or as they may be ordered by the
Board of Directors, shall render such account of his transactions as may be
required of him by the President or the Board of Directors from time to time and
shall otherwise perform such duties as may be required of him by the Board of
Directors.
The Board of Directors may require the Treasurer to give a bond
indemnifying the Corporation against larceny, theft, embezzlement, forgery,
misappropriation, or any other act of fraud or dishonesty resulting from his
duties as Treasurer of the Corporation, which bond shall be in such amount as
appropriate resolution or resolutions of the Board of Directors may require.
Section 6. Vacancies or Absences:
- ---------------------------------
If a vacancy in any office arises in any manner, the directors then in
office may choose, by a majority vote, a successor to hold office for the
unexpired term of the officer. If any officer shall be absent or unable for any
reason to perform his duties, the Board of Directors, to the extent not
otherwise inconsistent with these Bylaws, may direct that the duties of such
officer during such absence or inability shall be performed by such other
officer or subordinate officer as seems advisable to the Board.
Section 7. Compensation:
- ------------------------
No officer shall receive any salary or compensation for his services
unless and until the Board of Directors authorizes and fixes the amount and
terms of such salary or compensation.
ARTICLE V
STOCK
Section 1. Regulations:
The Board of Directors shall have power and authority to take all such
rules and regulations as they deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Corporation.
The Board of Directors may appoint a Transfer Agent and/or a Registrar and may
require all stock certificates to bear the signature of such Transfer Agent
and/or Registrar.
<PAGE>
Section 2. Restrictions on Stock:
- ---------------------------------
The Board of Directors may restrict any stock issued by giving the
Corporation or any stockholder "first right of refusal to purchase" the stock,
by making the stock redeemable or by restricting the transfer of the stock,
under such terms and in such manner as the directors may deem necessary and as
are not inconsistent with the Articles of Incorporation or by statute. Any stock
so restricted must carry a stamped legend setting out the restriction or
conspicuously noting the restriction and stating where it may be found in the
records of the Corporation.
ARTICLE VI
DIVIDENDS AND FINANCES
Section l. Dividends:
- ---------------------
Dividends may be declared by the directors and paid out of any funds
legally available therefor under the laws of Delaware, as may be deemed
advisable from time to time by the Board of Directors of the Corporation. Before
declaring any dividends, the Board of Directors may set aside out of net profits
or earned or other surplus such sums as the Board may think proper as a reserve
fund to meet contingencies or for other purposes deemed proper and to the best
interests of the Corporation.
Section 2. Monies:
- ------------------
The monies, securities, and other valuable effects of the Corporation
shall be deposited in the name of the Corporation in such banks or trust
companies as the Board of Directors shall designate and shall be drawn out or
removed only as may be authorized by the Board of Directors from time to time.
Section 3. Fiscal Year:
The Board of Directors by resolution shall determine the fiscal year of
the Corporation.
ARTICLE VII
AMENDMENTS
These Bylaws may be altered, amended, or repealed by the Board of
Directors by resolution of a majority of the Board.
<PAGE>
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify any and all of its directors or
officers, or former directors or officers, or any person who may have served at
its request as a director or officer of another corporation in which this
Corporation owns shares of capital stock or of which it is a creditor and the
personal representatives of all such persons, against expenses actually and
necessarily incurred in connection with the defense of any action, suit, or
proceeding in which they, or any of them, were made parties, or a party, by
reason of being or having been directors or officers or a director or officer of
the Corporation, or of such other corporation, except in relation to matters as
to which any such director or officer or person shall have been adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of any duty owed to the Corporation. Such indemnification shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled, independently of this Article, by law, under any Bylaw agreement, vote
of stockholders, or otherwise.
ARTICLE IX
CONFLICTS OF INTEREST
No contract or other transaction of the Corporation with any other
persons, firms or corporations, or in which the Corporation is interested, shall
be affected or invalidated by the fact that any one or more of the directors or
officers of the Corporation is interested in or is a director or officer of such
other firm or corporation; or by the fact that any director or officer of the
Corporation, individually or jointly with others, may be a party to or may be
interested in any such contract or transaction.
CERTIFICATE OF DESIGNATION
Andrew Hromyk certifies that he is the President and Secretary of Autoeye Inc.,
a Delaware corporation (hereinafter referred to as the "Company") and that,
pursuant to the Company's Certificate of Incorporation, as amended, and Section
151 of the General Business Corporation Law, the Board of Directors of the
Company adopted the following resolutions on January, 27, 2000 and that none of
the shares of Series A Convertible Preferred Stock referred to in this
Certificate of Designation have been issued.
Creation of Series A Convertible Preferred Stock
1. There is hereby created a series of preferred stock consisting of 750 shares
and designated as the Series A Convertible Preferred Stock ( "Preferred Stock"),
having the voting powers, preferences, relative, participating, limitations,
qualifications, optional and other special rights and the qualifications,
limitations and restrictions thereof that are set forth below.
Conversion Provisions
2. The holders of Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
Conversion
(a) Right to Convert. From and after the forty-fifth (45th) calendar day
following the day on which the Company receives payment in full for
Preferred Stock from and issues Preferred Stock to a particular holder of
Preferred Stock (the "Issuance Date"), all Preferred Stock held by that
holder shall be convertible at the option of the holder into such number of
shares of common stock of the Company ("Common Stock") as is calculated by
the Conversion Rate (as hereinafter defined). The Conversion Rate, subject
to the exception defined in paragraph 2(b) hereof, shall be that number of
shares of Common Stock equal to $1,000 divided by seventy five per cent
(75%) of the average Market Price (as hereinafter defined) of the shares of
Common Stock for the ten trading days immediately prior to the Conversion
Date (as hereinafter defined), provided that in no event shall: (i) less
than 250 shares of Common Stock be issued upon conversion of each one share
of Preferred Stock; and (ii) more than 5,000 shares of Common Stock be
issued upon conversion of each one share of Preferred Stock.
(b) Failure to Register Exemption. In the event that a registration statement
in respect of the Common Stock to be issued upon the conversion of the
Preferred Stock has not been filed with and declared effective by the
Securities and Exchange Commission on or before the date which is twelve
months following the Issuance Date (the "Anniversary Date"), the number of
shares of Common Stock issued to a particular holder will be calculated by
the Failure to Register Conversion Rate. The Failure to Register Conversion
Rate shall be that number of shares of Common Stock equal to $1,000 divided
by fifty per cent (50%) of the Market Price of the shares of Common Stock
on the day immediately preceding the Anniversary Date, provided that in no
event shall: (i) less than 250 shares of common Stock be issued upon
<PAGE>
conversion of each one share of Preferred Stock; and (ii) more than 5,000
shares of Common Stock be issued upon conversion of each one share of
Preferred Stock.
(c) Market Price. Market Price for a particular date shall be the
closing bid price of the shares of Common Stock on such date, as
reported by the National Association of Securities Dealers Automated
Quotation System (`NASDAQ"), or the closing bid price in the
over-the-counter market if other than NASDAQ.
(d) No Fractional Shares. No fractional shares of Common Stock shall be issued
upon conversion of the Preferred Stock, and in lieu thereof the number of
shares of Common Stock to be issued for each share of Preferred Stock
converted shall be rounded down to the nearest whole number of shares of
Common Stock. Such number of whole shares of Common Stock to be issued upon
the conversion of one share of Preferred Stock shall be multiplied by the
number of shares of Preferred Stock submitted for conversion pursuant to
the Notice of Conversion (defined below) to determine the total number of
shares of Common Stock to be issued in connection with any one particular
conversions.
(e) Method of Conversion. In order to convert Preferred Stock into shares of
Common Stock, a holder of Preferred Stock shall
(A) complete, execute and deliver to the Company and the Company's Transfer
Agent, Interwest Transfer Co. Inc. (the "Transfer Agent") the conversion
certificate attached hereto as Exhibit A (the "Notice of Conversion"), and
(B) surrender the certificate or certificates representing the
Preferred Stock being converted (the "Converted Certificate") to
the Transfer Agent.
Subject to paragraph 2(h) hereof, the Notice of Conversion shall be
effective and in full force and effect for a particular date if
delivered to the Company and the Transfer Agent on that particular
date prior to 5:00 pm, pacific time, by facsimile transmission or
otherwise, provided that particular date is a business day, and
provided that the original Notice of Conversion and the Converted
Certificate are delivered to and received by the Transfer Agent within
three (3) business days thereafter at 1981 East Murray Holladay Road,
Suite 100, PO Box 17136, Salt Lake City, Utah 84117 Telephone
801-272-9294 and that particular date shall be referred to herein as
the "Conversion Date". The person or persons entitled to receive the
shares of Common Stock to be issued upon conversion shall be treated
for all purposes as the record holder or holders of such shares of
Common Stock as of the Conversion Date. If the original Notice of
Conversion and the Converted Certificate are not delivered to and
received by the Transfer Agent within three (3) business days
following the Conversion Date, the Notice of Conversion shall become
<PAGE>
null and void as if it were never given and the Company shall, within
two (2) business days thereafter, instruct the Transfer Agent to
return to the holder by overnight courier any Converted Certificate
that may have been submitted in connection with any such conversion.
In the event that any Converted Certificate submitted represents a
number of shares of Preferred Stock that is greater than the number of
such shares that is being converted pursuant to the Notice of
Conversion delivered in connection therewith, the Transfer Agent shall
advise the Company to deliver a certificate representing the remaining
number of shares of Preferred Stock not converted.
(f) Absolute Obligation to issue Common Stock. Upon receipt of a Notice of
Conversion, the Company shall absolutely and unconditionally be obligated
to cause a certificate or certificates representing the number of shares of
Common Stock to which a converting holder of Preferred Stock shall be
entitled as provided herein, which shares shall constitute fully paid and
non-assessable shares of Common Stock and shall be issued to, delivered by
overnight courier to, and received by such holder by the sixth (6th)
business day following the Conversion Date. Such delivery shall be made at
such address as such holder may designate therefor in its Notice of
Conversion or in its written instructions submitted together therewith.
(g) Minimum Conversion. No less than 10 shares of Preferred Stock may be
converted at any one time by a particular holder, unless the holder
then holds less than 10 shares and converts all such shares held by
it at that time.
(h) Deemed Conversion. Notwithstanding any other provision herein, and provided
that a registration statement in respect of the Common Stock to be issued
upon the conversion of the Preferred Stock has been filed with and declared
effective by the Securities and Exchange Commission on or before the
Anniversary Date, all of the Preferred Stock outstanding on Anniversary
Date shall be deemed to convert into shares of Common Stock as is
calculated by the Conversion Rate as defined in paragraph 2(a) hereof,
provided that, in the event that this paragraph would result in a
particular holder of Preferred Stock holding, together with the shares of
Common Stock then held by that holder, more than 9.9% of the Company's then
issued and outstanding Common Stock, the conversion deemed hereby shall be
postponed until such time as the particular holder holds such number of
shares of Common Stock that, together with the shares of Common Stock then
held by that holder, would constitute less than 9.9% of the Company's then
issued and outstanding Common Stock. The onus for notifying the Company of
the application of this qualification shall be upon the particular holder.
Adjustments to Conversion Rate
(i) Reclassification, Exchange and Substitution. If the Common Stock to be
issued on conversion of the Preferred Stock shall be changed into the same
or a different number of shares of any other class or classes of stock,
whether by capital reorganization, reclassification, reverse stock split or
forward stock split or stock dividend or otherwise (other than a
subdivision or combination of shares provided for above), the holders of
the Preferred Stock shall, upon its conversion be entitled to receive, in
lieu of the Common Stock which the holders would have become entitled to
receive but for such change, a number of shares of such other class or
classes of stock that would have been subject to receipt by the holders if
they had exercised their rights of conversion of the Preferred Stock
immediately before that changes.
<PAGE>
(j) Reorganizations, Mergers, Consolidations or Sale of Assets. If at any time
there shall be a capital reorganization of the Company's common stock
(other than a subdivision, combination, reclassification or exchange of
shares provided for elsewhere in this Section 2) or merger of the Company
into another corporation, or the sale of the Company's properties and
assets as, or substantially as, an entirety to any other person, then, as a
part of such reorganization, merger or sale, lawful provision shall be made
so that the holders of the Preferred Stock receive the number of shares of
stock or other securities or property of the Company, or of the successor
corporation resulting from such merger, to which holders of the Common
Stock deliverable upon conversion of the Preferred Stock would have been
entitled on such capital reorganization, merger or sale if the Preferred
Stock had been converted immediately before that capital reorganization,
merger or sale to the end that the provisions of this paragraph (including
adjustment of the Conversion Rate then in effect and the number of shares
purchasable upon conversion of the Preferred Stock) shall be applicable
after that event as nearly equivalently as may be practicable.
(k) No Impairment. The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, recapitalization, transfer of
assets, merger, dissolution, or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 2 and in
the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Preferred Stock
against impairment.
(l) Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Rate for any shares of Preferred Stock
pursuant to paragraphs 2(i) or (j) hereof, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of Preferred Stock
effected thereby a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth: (i) such adjustments and
readjustments; (ii) the Conversion Rate at the time in effect; and (iii)
the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of such
holder's shares of Preferred Stock.
Liquidation Provisions
3. In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, holders of Preferred Stock shall be entitled
to receive an amount equal to $1,000.00 per share, plus any accrued and unpaid
dividends. After the full preferential liquidation amount has been paid to, or
determined and set apart for the Preferred Stock and all other series of
preferred stock hereafter authorized and issued, if any, the remaining assets of
the Company available for distribution to shareholders shall be distributed
ratably to the holders of the Common Stock. In the event the assets of the
Company available for distribution to its shareholders are insufficient to pay
<PAGE>
the full preferential liquidation amount per share required to be paid to the
holders of Company's Preferred Stock, the entire amount of assets of the Company
available for distribution to shareholders shall be paid up to their respective
full liquidation amounts first to the holders of Preferred Stock, then to any
other series of preferred stock hereafter authorized and issued, all of which
amounts shall be distributed ratably among holders of each such series of
preferred stock, and the Common Stock shall receive nothing. A reorganization or
any other consolidation or merger of the Company with or into any other
corporation, or any other sale of all or substantially all of the assets of the
Company, shall not be deemed to be a liquidation, dissolution or winding up of
the Company within the meaning of this Section 3, and the Preferred Stock shall
be entitled only to: (i) the rights provided in any agreement or plan governing
the reorganization or other consolidation, merger or sale of assets transaction;
(ii) the rights contained in the Delaware General Business Corporation Law; and
(iii) the rights contained in other Sections hereof.
Dividend Provisions
4. The holders of shares of Preferred Stock shall not be entitled to receive
any dividends.
Reservation of Stock to be issued upon Conversion
5. The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient, based on the
Conversion Rate then in effect, to effect the conversion of all then outstanding
shares of the Preferred Stock. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock, then, in addition to all
rights, claims and damages to which the holders of the Preferred Stock shall be
entitled to receive at law or in equity as a result of such failure by the
Company to fulfill its obligations to the holders hereunder, the Company will
take any and all corporate or other action as may, in the opinion of its
counsel, be helpful, appropriate or necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
Notices
6. In the event of the establishment by the Company of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any distribution, the Company shall mail to each
holder of Preferred Stock at least twenty (20) days prior to the date specified
therein a notice specifying the date on which any such record is to be taken for
the purpose of such distribution and the amount and character of such
distribution.
7. Any notices required by the provisions hereof to be given to the holders of
shares of Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid and return receipt requested, and addressed to each
holder of record at its address appearing on the books of the Company or to such
other address of such holder or its representative as such holder may direct.
<PAGE>
Voting Provisions
8. Except as otherwise expressly provided or required by law, the Preferred
Stock shall have no voting rights.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation of
Series A Convertible Preferred Stock to be duly executed by its President and
attested to by its Secretary this 27th day of January, 2000 who, by signing
their names hereto, acknowledge that this Certificate of Designation is the act
of the Company and state to the best of their knowledge, information and belief,
under the penalties of perjury, that the above matters and facts are true in all
material respects.
AUTOEYE INC.
--------------------------------------
Andrew Hromyk, President
--------------------------------------
Andrew Hromyk, Secretary
<PAGE>
EXHIBIT A
CONVERSION CERTIFICATE
AUTOEYE INC.
Series A Convertible Preferred Stock
The undersigned holder (the "Holder") is surrendering to Autoeye Inc., a
Delaware corporation (the "Company"), one or more certificates representing
shares of Series A Convertible Preferred Stock of the Company (the "Preferred
Stock") in connection with the conversion of all or a portion of the Preferred
Stock into shares of Common Stock, $0.0001 par value per share, of the Company
(the "Common Stock") as set forth below.
1. The Holder understands that the Preferred Stock was issued by the Company
pursuant to the exemption for registration under the United States Securities
Act of 1933, as amended (the "Securities Act"), provided by Regulation D
promulgated thereunder.
2. The Holder represents and warrants that all offers and sales of the Common
Stock issued to the Holder upon such conversion of the Preferred Stock shall be
made (a) pursuant to an effective registration statement under the Securities
Act, (in which case the Holder represents that a prospectus has been delivered)
(b) in compliance with Rule 144, or (c) pursuant to some other exemption from
registration.
Number of Shares of Preferred Stock being Converted:
Applicable Conversion Rate:
OR
Applicable Alternative Conversion Rate:
Number of Shares of Common Stock To be issued:
Conversion Date:
Delivery instructions for certificates of Common Stock and for new
certificates representing any remaining shares of Preferred Stock:
-----------------------------------
Name of Holder - Printed
-----------------------------------
Signature of Holder
FORESTINDUSTRY.COM, INC.
2000 STOCK OPTION PLAN
1. Purpose of the Plan. The purposes of this Stock Option Plan are to attract
and retain the best available personnel, to provide additional incentive to such
individuals, and to promote the success of the Company's business by aligning
employee financial interests with long-term shareholder value.
Options granted hereunder may be either Incentive Stock Options or
Nonqualified Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee, if such Committee has been
appointed, or the Board of Directors of the Company, if such Committee has not
been appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed; provided, however, if the Board of Directors appoints more than one
Committee pursuant to Section 4, then "Committee" shall refer to the appropriate
Committee, as indicated by the context of the reference.
(d) "Common Shares" shall mean the shares of Common Stock of
forestindustry.com, Inc.
(e) "Company" shall mean forestindustry.com, Inc., a Delaware corporation and
any successor thereto.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave,
maternity leave, infant care leave, medical emergency leave or any other leave
of absence authorized in writing by a Vice President of the Company prior to its
commencement.
(g) "Employee" shall mean any person, including officers, employed by the
Company or any Parent or Subsidiary of the Company.
(h) "Incentive Stock Option" shall mean any Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
<PAGE>
(i) "Maximum Annual Employee Grant" shall have the meaning set forth in Section
5(e).
(j) "Non-Employee Director" shall have the same meaning as defined or
interpreted for purposes of Rule 16b-3 (including amendments and successor
provisions) as promulgated by the Securities and Exchange Commission pursuant to
its authority under the Exchange Act ("Rule 16b-3").
(k) "Nonqualified Stock Option" shall mean an Option not intended to qualify as
an Incentive Stock Option.
(l) "Option" shall mean a stock option granted pursuant to the Plan.
(m) "Optioned Shares" shall mean the Common Shares subject to an Option.
(n) "Optionee" shall mean an Employee who receives an Option.
(o) "Outside Director" shall have the same meaning as defined or interpreted for
purposes of Section 162(m) of the Code.
(p) "Parent" shall mean a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(q) "Plan" shall mean this 2000 Stock Option Plan, including any amendments
thereto.
(r) "Share" shall mean one share of the Company's Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(s) "Subsidiary" shall mean (i) in the case of an Incentive Stock Option
a "subsidiary corporation," whether now or hereafter existing, as defined in
Section 424(f) of the Code, and (ii) in the case of a Nonqualified Stock Option,
in addition to a subsidiary corporation as defined in (i), a limited liability
company, partnership or other entity in which the Company controls 50 percent or
more of the voting power or equity interests.
3. Shares Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 250,000 Shares. The Shares may be authorized, but unissued, or
reacquired Shares.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
<PAGE>
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board of Directors of the
Company.
(1) The Board of Directors may appoint one or more Committees
each consisting of not less than two members of the Board of Directors to
administer the Plan on behalf of the Board of Directors, subject to such terms
and conditions as the Board of Directors may prescribe. Once appointed, such
Committees shall continue to serve until otherwise directed by the Board of
Directors.
(2) Any grants of Options to officers who are subject to Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act") shall be made by
(i) a Committee of two or more directors, each of whom is a Non-Employee
Director and an Outside Director or (ii) as otherwise permitted by both Rule
16b-3, Section 162(m) of the Code and other applicable regulations.
(3) Subject to the foregoing subparagraphs (1) and (2), from
time to time the Board of Directors may increase the size of the Committee(s)
and appoint additional members thereof, remove members (with or without cause)
and appoint new members in substitution therefor, or fill vacancies however
caused.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options or Nonqualified Stock Options; (ii) to determine, in accordance with
Section 8(b) of the Plan, the fair market value of the Shares; (iii) to
determine, in accordance with Section 8(a) of the Plan, the exercise price per
Share of Options to be granted; (iv) to determine the Employees to whom, and the
time or times at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to interpret the Plan; (vi) to prescribe, amend,
and rescind rules and regulations relating to the Plan; (vii) to determine the
terms and provisions of each Option granted (which need not be identical) and,
with the consent of the holder thereof, modify or amend each Option; (viii) to
reduce the exercise price per Share of outstanding and unexercised Options; (ix)
to accelerate or defer (with the consent of the Optionee) the exercise date of
any Option; (x) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Board; and (xi) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations, and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
<PAGE>
5. Eligibility.
-----------
(a) Options may be granted only to Employees. For avoidance of doubt, directors
are not eligible to participate in the Plan unless they are full-time
Employees.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonqualified Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonqualified Stock Options.
(c) For purposes of Section 5(b), Options shall be taken into account in
the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(d) Nothing in the Plan or any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of employment with the
Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the employment relationship at any time, with or
without cause.
(e) The maximum number of Shares with respect to which an Option or
Options may be granted to any Employee in any one taxable year of the Company
shall not exceed 5,000 Shares (the "Maximum Annual Employee Grant").
6. Term of Plan. The Plan shall become effective upon its adoption by the Board.
It shall continue in effect until February 29, 2010, unless sooner terminated
under Section 14 of the Plan.
7. Term of Option. The term of each Option shall be no more than ten (10) years
from the date of grant. However, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Option is granted, owns Shares
representing more than ten percent (10%) of the voting power of all classes of
shares of the Company or any Parent or Subsidiary, the term of the Option shall
be no more than five (5) years from the date of grant.
8. Exercise Price and Consideration.
--------------------------------
(a) The per Share exercise price under each Option shall be such price
as is determined by the Board, subject to the following:
(1) In the case of an Incentive Stock Option
(i) granted to an Employee who, at the time of the grant of such Incentive
Stock Option, owns shares representing more than ten percent (10%) of the voting
<PAGE>
power of all classes of shares of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the fair market value per
Share on the date of grant.
(ii) granted to any other Employee, the per Share exercise price shall be
no less than 100% of the fair market value per Share on the date of grant.
(2) In the case of a Nonqualified Stock Option the per Share
exercise price may not be less than the fair market value per Share on the date
of grant.
(b) The fair market value per Share shall be the closing price per Share
on the Nasdaq Stock Market ("Nasdaq") on the date of grant or the closing bid
price in the over-the-counter market, if other than Nasdaq.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board at the time of grant and may consist of cash and/or check. Payment may
also be made by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds necessary to pay the exercise price. If the Optionee is
an officer of the Company within the meaning of Section 16 of the Exchange Act,
he may in addition be allowed to pay all or part of the purchase price with
Shares. Shares used by officers to pay the exercise price shall be valued at
their fair market value on the exercise date.
(d) Prior to issuance of the Shares upon exercise of an Option, the
Optionee shall pay any federal, state, local or other withholding obligations of
the Company, if applicable. If an Optionee is an officer of the Company within
the meaning of Section 16 of the Exchange Act, he may elect to pay such
withholding tax obligations by having the Company withhold Shares having a value
equal to the amount required to be withheld. The value of the Shares to be
withheld shall equal the fair market value of the Shares on the day the Option
is exercised. The right of an officer to dispose of Shares to the Company in
satisfaction of withholding tax obligations shall be deemed to be approved as
part of the initial grant of an option, unless thereafter rescinded, and shall
otherwise be made in compliance with Rule 16b-3 and other applicable
regulations.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board at the time of grant, and as shall be permissible under
the terms of the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
<PAGE>
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the share
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such share certificate promptly upon exercise of the Option. In the
event that the exercise of an Option is treated in part as the exercise of an
Incentive Stock Option and in part as the exercise of a Nonqualified Stock
Option pursuant to Section 5(b), the Company shall issue a share certificate
evidencing the Shares treated as acquired upon the exercise of an Incentive
Stock Option and a separate share certificate evidencing the Shares treated as
acquired upon the exercise of a Nonqualified Stock Option, and shall identify
each such certificate accordingly in its share transfer records. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the share certificate is issued, except as provided in Section 11 of
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Status as Employee. In the event of termination of an
Optionee's Continuous Status as an Employee, such Optionee may exercise stock
options to the extent exercisable on the date of termination. Such exercise must
occur within thirty (30) days (or such shorter time as may be specified in the
grant), after the date of such termination (but in no event later than the date
of expiration of the term of such Option as set forth in the Option Agreement).
To the extent that the Optionee was not entitled to exercise the Option at the
date of such termination, or does not exercise such Option within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee as a result of total and permanent disability (i.e., the inability to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
twelve (12) months), the Optionee may exercise the Option, but only to the
extent of the right to exercise that would have accrued had the Optionee
remained in Continuous Status as an Employee for a period of twelve (12) months
after the date on which the Employee ceased working as a result of the total and
permanent disability. Such exercise must occur within eighteen (18) months (or
such shorter time as is specified in the grant) from the date on which the
Employee ceased working as a result of the total and permanent disability (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement). To the extent that the Optionee was not entitled
to exercise such Option within the time specified herein, the Option shall
terminate.
<PAGE>
(d) Death of Optionee. Notwithstanding the provisions of Section 9(b) above, in
the event of the death of an Optionee:
(i) who is at the time of death an Employee of the Company, the
Option may be exercised, at any time within six (6) months following the date of
death (but in no event later than the date of expiration of the term of such
Option as set forth in the Option Agreement), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an Employee
twelve (12) months after the date of death; or
(ii) whose Option has not yet expired but whose Continuous
Status as an Employee terminated prior to the date of death, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
(e) Notwithstanding subsections (b), (c), and (d) above, the Board shall
have the authority to extend the expiration date of any outstanding option in
circumstances in which it deems such action to be appropriate (provided that no
such extension shall extend the term of an option beyond the date on which the
option would have expired if no termination of the Employee's Continuous Status
as an Employee had occurred).
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee; provided that the Board may
permit further transferability, on a general or specific basis, and may impose
conditions and limitations on any permitted transferability.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, the Maximum Annual Employee Grant and the number of
Shares which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per Share covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination, or reclassification of
the Shares, or any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
<PAGE>
be made by the Board, whose determination in that respect shall be final,
binding, and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of any class, or securities convertible into shares of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise an Option as to all or any part of the Optioned Shares, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, each Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless such
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the Optioned Shares, including Shares as to which the Option would
not otherwise be exercisable. If the Board makes an Option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Company completes the corporate action
relating to the grant of an option and all conditions to the grant have been
satisfied, provided that conditions to the exercise of an option shall not defer
the date of grant. Notice of a grant shall be given to each Employee to whom an
Option is so granted within a reasonable time after the determination has been
made.
13. Substitutions and Assumptions. The Board shall have the right to substitute
or assume Options in connection with mergers, reorganizations, separations, or
other transactions to which Section 424(a) of the Code applies, provided such
substitutions and assumptions are permitted by Section 424 of the Code and the
regulations promulgated thereunder. The number of Shares reserved pursuant to
Section 3 may be increased by the corresponding number of Options assumed and,
in the case of a substitution, by the net increase in the number of Shares
subject to Options before and after the substitution.
<PAGE>
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable (including,
but not limited to amendments which the Board deems appropriate to enhance the
Company's ability to claim deductions related to stock option exercises).
(b) Employees in Foreign Countries. The Board shall have the authority
to adopt such modifications, procedures, and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Subsidiaries may operate to assure the viability of the
benefits from Options granted to Employees employed in such countries and to
meet the objectives of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, the
British Columbia Securities Act and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
16. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Hart &Trinen, LLP
1624 Washington St.
Denver, CO 80203
(303) 839-0061
(303) 839-5414 Fax
May 18, 2000
forestindustry.com, Inc.
504 - 999 Canada Place
Vancouver, British Columbia
Canada V6C 3E1
This letter will constitute an opinion upon the legality of the sale by certain
Selling Shareholders of forestindustry.com, Inc., a Delaware corporation (the
"Company"), of up to 2,361,721 shares of common stock, all as referred to in the
Registration Statement on Form SB-2 filed by the Company with the Securities and
Exchange Commission.
We have examined the Articles of Incorporation, the Bylaws and the minutes of
the Board of Directors of the Company and the applicable laws of the State of
Delaware, and a copy of the Registration Statement. In our opinion, the Company
was authorized to issue the shares of stock mentioned above and such shares
will, when sold, be legally issued, fully paid and non-assessable.
Very truly yours,
HART & TRINEN
William T. Hart
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT is made as of the 20th day of January, 2000.
AMONG:
AUTOEYE INC., a body corporate formed pursuant to the laws of the State of
Delaware and having an office for business located at Suite 1650, 200 Burrard
Street, Vancouver, British Columbia, V6C 3L6
(the "Purchaser")
AND:
TEACO PROPERTIES LTD., a body corporate formed pursuant to the laws of the
Province of British Columbia and having an office for business located at 649
Belle View Place, Nanaimo, British Columbia, V9V 1B5
("Teaco")
AND:
JOE PERRATON, Businessman, of 7491 Elizabeth Way, Lantzville, British Columbia,
V0R 2H0
AND:
LARA PERRATON, Businesswoman, of 485 Howard Avenue, Nanaimo, British Columbia,
V9R 3S2
(Teaco, Joe Perraton, and Lara Perraton being hereinafter collectively referred
to as the "Vendors")
WHEREAS:
A. The Forest Industry Online Inc. (the "Company") is a body corporate formed
pursuant to the laws of the Province of British Columbia and engaged in the
business of providing direct customer service and support to businesses,
individuals and organizations within the worldwide forest and wood product
industries;
B. The Vendors own all of the issued and outstanding common shares in the
capital stock of the Company (the "Company Common Shares"); and
C. The Vendors have agreed to sell and the Purchaser has agreed to purchase
the Company Common Shares, subject to the terms and conditions of this
Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement the following terms will have the following meanings:
(a) "Acquisition Shares" means the 10,000,000 Purchaser Common Shares to be
issued in the names of the Vendors at Closing;
(b) "Agreement" means this agreement among the Purchaser and the Vendors;
(c) "Audited Company Financial Statements" means the audited financial
statements of the Company for the fiscal years ended July 31, 1998
and 1999, prepared in accordance with United States' generally
accepted accounting principles, together with the unqualified
auditors' report thereon attached hereto as Schedule "A";
(d) "Business" means all aspects of the business conducted by the
Company, including, without limitation, the services and support
provided to the forest and wood product industries;
(e) "Closing" means the completion, on the Closing Date, of the transactions
contemplated hereby in accordance with Article 10 hereof;
(f) "Closing Date" means the day on which all conditions precedent to
the completion of the transaction as contemplated hereby have been
satisfied or waived; provided that in no event shall the Closing
Date be later than January 31, 2000;
(g) "Company" means The Forest Industry Online Inc.;
(h) "Company Accounts Payable and Liabilities" means all accounts
payable and liabilities of the Company due and owing as of December
31, 1999 as set forth in Schedule "E" hereto;
(i) "Company Accounts Receivable" means all accounts receivable and
other debts owing to the Company as of December 31, 1999 as set
forth in Schedule "D" hereto;
(j) "Company Assets" means the undertaking and all the property and
assets of the Business of every kind and description wheresoever
situated including, without limitation, the Company Equipment, the
Company Inventory, the Company Material Contracts, the Company
Accounts Receivable, the Company Cash, the Company Intangible Assets
and the Company Goodwill, and all credit cards, charge cards and
banking cards issued to the Company;
(k) "Company Cash" means all cash on hand or on deposit to the credit of the
Company on the Closing Date;
(l) "Company Common Shares" means Common Shares without par value in the
capital stock of the Company;
<PAGE>
(m) "Company Equipment" means all machinery, equipment, furniture, and
furnishings used in the Business, including, without limitation, the
items more particularly described in Schedule "B" hereto;
(n) "Company Financial Statements" means, collectively, the Audited
Company Financial Statements and the Quarterly Company Financial
Statements, true copies of which are attached as Schedule "A"
hereto;
(o) "Company Goodwill" means the goodwill of the Business together with the
exclusive right of the Purchaser to represent itself as carrying on the
Business in succession of the Company subject to the terms hereof, the
right to all corporate, operating and trade names associated with the
Business, or any variations of such names as part of or in connection with
the Business, all telephone listings and telephone advertising contracts,
all lists of customers, books and records and other information relating to
the Business, all necessary licenses and authorizations and any other
rights used in connection with the Business;
(p) "Company Insurance Policies" means the public liability insurance
and insurance against loss or damage to the Company Assets and the
Business as described in Schedule "G" hereto;
(q) "Company Intangible Assets" means all of the intangible assets of
the Company, including, without limitation, the Company Goodwill,
all trademarks, logos, copyrights, designs, and other intellectual
and industrial property including, without limiting the generality
of the foregoing, the domain names "www.forestindustry.com",
www.forestindustry.net, and "www.forestind.com" and all other domain
names registered by or in the name of the Company or the Vendors and
related to the Business;
(r) "Company Inventory" means all inventory and supplies of the Business
existing on the Closing Date;
(s) "Company Material Contracts" means the burden and benefit of and the right,
title and interest of the Company in, to and under all trade and non-trade
contracts, engagements or commitments, whether written or oral, to which
the Company is entitled in connection with the Business whereunder the
Company is obligated to pay or entitled to receive the sum of $10,000 or
more including, without limitation, any pension plans, profit sharing
plans, bonus plans, loan agreements, security agreements, indemnities and
guarantees, any agreements with employees, lessees, licensees, managers,
accountants, suppliers, agents, distributors, officers, directors,
attorneys or others which cannot be terminated without liability on not
more than one month's notice, and those contracts listed in Schedule "C"
hereto;
(t) "Employment Agreement" means the employment agreement among the
Company and Joe Perraton to be entered into pursuant to Article 7
hereof substantially in the form attached hereto as Schedule "K";
(u) "Place of Closing" means the offices of Century Capital Management Ltd. or
such other place as the Purchaser and the Vendors may mutually agree upon;
<PAGE>
(v) "Private Placement" means the private sale by the Purchaser of not
less than 750 Purchaser Preferred Shares at a price of $1,000.00 per
Purchaser Preferred Share;
(w) "Purchaser" means Autoeye Inc.;
(x) "Purchaser Accounts Payable and Liabilities" means all accounts
payable and liabilities of the Purchaser due and owing as of
December 31, 1999 as set forth is Schedule "I" hereto;
(y) "Purchaser Common Shares" means the shares of common stock in the capital
of the Purchaser;
(z) "Purchaser Financial Statements" means the audited financial
statements of the Purchaser for the periods ended May 31, 1998 and
1999 and the management prepared financial statements of the
Purchaser for the six month period ended November 30, 1998 and 1999,
true copies of which are attached as Schedule "H" hereto;
(aa) "Purchaser Preferred Shares" means the 750 shares of the Purchaser's
Series A Convertible Preferred Stock to be issued in the Private
Placement pursuant to the terms of the Subscription;
(bb) "Quarterly Company Financial Statements" means the management
prepared financial statements of the Company for the three month
period ended October 31, 1998 and 1999, prepared in accordance with
United States' generally accepted accounting principles, attached
hereto as Schedule "A";
(cc) "Subscription" means the subscription for Purchaser Preferred Shares
to be entered into at or prior to closing pursuant to the Private
Placement, substantially in the form attached hereto as Schedule
"J"; and
(dd) "Teaco" means Teaco Properties Ltd.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
Captions and Section Numbers
1.2 The headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
Section References and Schedules
1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
<PAGE>
Information concerning the Company
Schedule "A" Company Financial Statements
Schedule "B" Company Equipment
Schedule "C" Company Material Contracts
Schedule "D" Company Accounts Receivable
Schedule "E" Company Accounts Payable and Liabilities
Schedule "F" Debts to Related Parties
Schedule "G" Company Insurance Policies
Information concerning the Purchaser
Schedule "H" Purchaser Financial Statements
Schedule "I" Purchaser Accounts Payable and Liabilities
Schedule "J" Subscription
Schedule "K" Employment Agreement
Severability of Clauses
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
Currency
1.5 Unless otherwise specified, all sums referred to herein and all payments to
be made hereunder will be in lawful money of the United States of America.
ARTICLE 2
PURCHASE AND SALE OF COMPANY COMMON SHARES
Sale of Company Common Shares
2.1 The Vendors agree to sell to the Purchaser, and the Purchaser agrees to
purchase from the Vendors, all the Company Common Shares at Closing subject to
the terms and conditions of this Agreement.
Consideration
2.2 In consideration of the sale of the Company Common Shares by the Vendors to
the Purchaser, the Purchaser agrees to issue the Acquisition Shares to the
Vendors at Closing.
Adherence with Applicable Securities Laws
2.3 The Vendors agree that they are acquiring the Acquisition Shares for
investment purposes and will not offer, sell or otherwise transfer, pledge or
hypothecate any of the Acquisition Shares (other than pursuant to an effective
Registration Statement under the Securities Act of 1933 (United States), as
amended) directly or indirectly unless:
<PAGE>
(a) the sale is to the Purchaser;
(b) the sale is made pursuant to the exemption from registration under
the Securities Act of 1933 (United States) provided by Rule 144
thereunder; or
(c) the Acquisition Shares are sold in a transaction that does not
require registration under the Securities Act of 1933 (United
States) or any applicable United States state laws and regulations
governing the offer and sale of securities, and the Vendor selling
same has furnished to the Purchaser an opinion of counsel to that
effect or such other written opinion as may be reasonably required
by the Purchaser.
The Vendors acknowledge that the certificates representing the Acquisition
Shares shall bear the following legend:
NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED BY
THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION STATEMENT UNDER
THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, IN RESPECT OF SUCH
SHARES IS THEN IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT IS THEN IN FACT APPLICABLE TO SAID SHARES.
The Vendors further acknowledge that trades of Acquisition Shares within
British Columbia will be subject to restrictions imposed by the Securities Act
(British Columbia) and that the Acquisition Shares may not be traded within
British Columbia unless the trade is made solely through a registered dealer and
a prospectus is filed with the British Columbia Securities Commission in respect
of the Acquisition Shares (and a final receipt obtained for such prospectus) or
an exemption from the registration and prospectus requirements may be relied
upon.
Allocation
2.4 The Acquisition Shares shall be allocated and issued to the Vendors on the
following basis:
(a) 6,900,000 Acquisition Shares to Teaco;
(b) 2,400,000 Acquisition Shares to Joe Perraton; and
(c) 700,000 Acquisition Shares to Lara Perraton.
ARTICLE 3
REGISTRATION RIGHTS
3.1As soon as practicable after the Closing the Purchaser shall file a
registration statement on Form SB-2 (or similar form) under the Securities Act
of 1933 (United States) covering not more than 200,000 of the Acquisition Shares
and will use its best efforts to cause such registration statement to be
declared effective by the Securities and Exchange Commission at the earliest
practicable date, all at the Purchaser's sole cost and expense. Such best
<PAGE>
efforts shall include responding to all comments received by the staff of the
Securities and Exchange Commission and promptly preparing and filing amendments
to such registration statement which are responsive to the comments received
from the staff of the Securities and Exchange Commission. Such registration
statement shall name the Vendors as selling shareholders and shall provide for
the sale by the Vendors of the Acquisition Shares being registered from time to
time directly to purchasers or in the over-the-counter market or through or to
securities brokers or dealers that may receive compensation in the form of
discounts, concessions, or commissions. None of the foregoing shall in any way
limit the Vendors' rights to sell any Acquisition Shares held by them in
reliance on an exemption from the registration requirements under the Securities
Act of 1933 (United States) in connection with a particular transaction.
3.2 The Purchaser shall use its best efforts to maintain the currency of the
registration statement filed with the Securities and Exchange Commission in
respect of the Acquisition Shares being registered for a period of twelve months
following the effective date thereof.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF
THE VENDORS
Representations and Warranties
4.1 Each of the Vendors jointly and severally represent and warrant in all
material respects to the Purchaser, with the intent that the Purchaser will rely
thereon in entering into this Agreement and in completing the transactions
contemplated hereby, that:
The Company - Corporate Status and Capacity
(a) Incorporation. The Company is a corporation duly incorporated and validly
subsisting under the laws of the Province of British Columbia, and is in
good standing with the office of the Registrar of Companies;
(b) Carrying on Business. The Company carries on business in the
Province of British Columbia. The Company has an office in Nanaimo,
British Columbia and in no other locations. The nature of the
Business does not require the Company to register or otherwise be
qualified to carry on business in any other jurisdiction;
(c) Corporate Capacity. The Company has the corporate power, capacity and
authority to own the Company Assets and to carry on the Business;
The Vendors - Capacity and Tax Matters
(d) Capacity. Each of the Vendors, as to their portion of the Company
Common Shares, has the full right, power and authority to enter into
and complete this Agreement on the terms and conditions contained
herein and to transfer and cause the transfer of full legal,
registered and beneficial title and ownership of their portion of
the Company Common Shares to the Purchaser;
(e) Resident in Canada. Each of the Vendors is a resident of Canada within the
meaning of the Income Tax Act (Canada).
<PAGE>
The Company - Capitalization
(f) Authorized Capital. The authorized capital of the Company consists of
10,000 Common Shares without par value (being the Company Common Shares);
(g) Ownership of Company Common Shares. The issued and outstanding share
capital of the Company will on to Closing consist of 100 Common
Shares without par value(being the Company Common Shares), which
shares on Closing shall be validly issued and outstanding as fully
paid and non-assessable shares. Each of the Vendors will be
immediately prior to Closing the registered and beneficial owner of
the number of the Company Common Shares set forth opposite their
name as follows:
Teaco - 69 Company Common Shares
Joe Perraton - 24 Company Common Shares
Lara Perraton - 7 Company Common Shares
Each of the Vendors owns or will immediately prior to Closing own his portion of
the Company Common Shares free and clear of any and all liens, charges, pledges,
encumbrances, restrictions on transfer and adverse claims whatsoever;
(h) No Option. No person, firm or corporation has any agreement or option or
any right capable of becoming an agreement or option for the acquisition of
the Company Common Shares or for the purchase, subscription or issuance of
any of the unissued shares in the capital of the Company;
(i) No Restrictions. The transfer of the Company Common Shares to the Purchaser
will not be restricted under the charter documents of the Company or under
any agreement, and will be permitted under all applicable laws and
regulations;
The Company - Records and Company Financial Statements
(j) Charter Documents. The charter documents of the Company have not been
altered since the incorporation of the Company, except as filed in the
record book of the Company;
(k) Books and Records. The books and records of the Company fairly and
correctly set out and disclose in all material respects the
financial position of the Company, and all material financial and
other transactions of the Company relating to the Business,
including any and all Company Material Contracts and any amendments
thereto, have been accurately recorded or filed in such books and
records;
(l) Company Financial Statements. The Company Financial Statements are
true and correct and present fairly and correctly the assets and
liabilities (whether accrued, absolute, contingent or otherwise) of
the Company as of the respective dates thereof, and the sales and
earnings of the Business during the periods covered thereby, in all
material respects, and have been prepared in substantial accordance
with United States' generally accepted accounting principles
consistently applied;
<PAGE>
(m) Company Accounts Receivable. All Company Accounts Receivable are bona fide
and are good and collectible without, to the knowledge and belief of the
Vendors, set-off or counterclaim;
(n) Company Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of the Company which are not
disclosed in Schedules "E" or "F" hereto or reflected in the Company
Financial Statements except those incurred in the ordinary course of
business since the date of the said financial statements, and the Company
has not guaranteed or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation. Without limiting the
generality of the foregoing, all accounts payable and liabilities of the
Company are described in Schedules "E" or "F" hereto;
(o) No Debt to Related Parties. The Company is not, and on Closing will not be,
materially indebted to any of the Vendors nor to any family member of any
of the Vendors, nor to any affiliate, director or officer of the Company or
the Vendors except as set forth in Schedule "F" hereto;
(p) No Related Party Debt to the Company. None of the Vendors is now indebted
to or under any financial obligation to the Company on any account
whatsoever, except for advances on account of travel and other expenses not
exceeding $5,000 in total;
(q) No Dividends. No dividends or other distributions on any shares in the
capital of the Company have been made, declared or authorized since the
date of the Company Financial Statements;
(r) No Payments. No payments of any kind have been made or authorized
since the date of the Company Financial Statements to or on behalf
of the Vendors or to or on behalf of officers, directors,
shareholders or employees of the Company or under any management
agreements with the Company, except payments made in the ordinary
course of business and at the regular rates of salary or other
remuneration payable to them;
(s) No Pension Plans. There are no pension, profit sharing, group insurance or
similar plans or other deferred compensation plans affecting the Company;
(t) No Adverse Events. Since the date of the Company Financial Statements
(i) there has not been any material adverse change in the
financial position or condition of the Company, its
liabilities or the Company Assets or any damage, loss or other
change in circumstances materially affecting the Company, the
Business or the Company Assets or the Company's right to carry
on the Business, other than changes in the ordinary course of
business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
adversely affecting the Company, the Business or the Company
Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by the Company to the Vendors or
<PAGE>
to any of the Company's officers, employees or agents or any
bonus, payment or arrangement made to or with any of them,
(iv) the Business has been and continues to be carried on in the ordinary
course,
(v) the Company has not waived or surrendered any right of material value,
(vi) the Company has not discharged or satisfied or paid any lien
or encumbrance or obligation or liability other than current
liabilities in the ordinary course of business, and
(vii) no capital expenditures in excess of $10,000 individually or $30,000 in
total have been authorized or made;
The Company - Income Tax Matters
(u) Tax Returns. All tax returns and reports of the Company required by
law to be filed have been filed and are true, complete and correct,
and any taxes payable in accordance with any return filed by the
Company or in accordance with any notice of assessment or
reassessment issued by any taxing authority have been so paid;
(v) Current Taxes. Adequate provisions have been made for taxes payable for the
current period for which tax returns are not yet required to be filed and
there are no agreements, waivers, or other arrangements providing for an
extension of time with respect to the filing of any tax return by, or
payment of, any tax, governmental charge or deficiency by the Company. The
Vendors are not aware of any contingent tax liabilities or any grounds
which would prompt a reassessment including aggressive treatment of income
and expenses in filing earlier tax returns;
The Company- Applicable Laws and Legal Matters
(w) Licences. The Company holds all licences and permits as may be
requisite for carrying on the Business in the manner in which it has
heretofore been carried on, which licences and permits have been
maintained and continue to be in good standing;
(x) Applicable Laws. The Company has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it the violation of which would have a material adverse effect on
the Company, and the Company is not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees the
contravention of which would result in a material adverse impact on
the Business;
(y) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding or enquiry pending or
threatened against or relating to the Company, the Business, or any
of the Company Assets, nor does the Company have any knowledge of
any deliberate act or omission of the Company that would form any
material basis for any such action, proceeding or enquiry;
<PAGE>
(z) No Bankruptcy. The Company has not made any voluntary assignment or
proposal under applicable laws relating to insolvency and bankruptcy
and no bankruptcy petition has been filed or presented against the
Company and no order has been made or a resolution passed for the
winding-up, dissolution or liquidation of the Company;
(aa) Labour Matters. The Company is not party to any collective agreement
relating to the Business with any labour union or other association
of employees and no part of the Business has been certified as a
unit appropriate for collective bargaining or, to the knowledge of
the Vendors, has made any attempt in that regard;
(bb) Finder's Fees. The Company is not party to any agreement which
provides for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become payable
to any third party in connection with the execution and delivery of
this Agreement and the transactions contemplated herein except as
due to Century Capital Management Ltd.;
Execution and Performance of Agreement
(cc) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of Teaco and this Agreement constitutes
a legal, valid and binding obligation of the Vendors and is
enforceable against each of them in accordance with its terms;
(dd) No Violation or Breach. The performance of this Agreement will not
- ----------------------------
(i) violate the charter documents of the Company or result in any
breach of, or default under, any loan agreement, mortgage,
deed of trust, or any other agreement to which the Vendors or
the Company, or any of them, is a party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, the Company Material Contracts,
or any right or rights enjoyed by the Company,
(iii)result in any alteration of the Company's obligations under any agreement
to which the Company is party including, without limitation, the Company
Material Contracts,
(iv) result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favour of a third
party upon or against the Company Assets,
(v) result in the imposition of any tax liability to the Company relating to
the Company Assets or the Company Common Shares, or
(vi) violate any court order or decree to which the Company and the
Vendors or any of them are subject.
<PAGE>
The Company Assets - Ownership and Condition
(ee) Business Assets. The Company Assets comprise all of the property and
assets of the Business, and none of the Vendors nor any other
person, firm or corporation owns any assets used by the Company in
operating the Business, whether under a lease, rental agreement or
other arrangement;
(ff) Title. The Company is the legal and beneficial owner of the Company Assets,
free and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances or other claims whatsoever;
(gg) No Option. No person, firm or corporation has any agreement or option or a
right capable of becoming an agreement for the purchase of any of the
Company Assets;
(hh) Company Insurance Policies. The Company maintains the public liability
insurance and insurance against loss or damage to the Company Assets and
the Business as described in Schedule "G" hereto;
(ii) Company Material Contracts. The Company Material Contracts listed in
Schedule "C" constitute all of the material contracts of the Company;
(jj) No Default. There has not been any default in any material
obligation of either of the Company, the Vendors or any other party
to be performed under any of the Company Material Contracts, each of
which is in good standing and in full force and effect and
unamended, and the Vendors are not aware of any default in the
obligations of any other party to any of the Company Material
Contracts;
(kk) No Compensation on Termination. There are no agreements, commitments or
understandings relating to severance pay or separation allowances on
termination of employment of any employee of the Company. The Company is
not obliged to pay benefits or share profits with any employee after
termination of employment except as required by law;
The Company Assets - Company Equipment
(ll) Company Equipment. The Company Equipment has been maintained in a manner
consistent with that of a reasonably prudent owner;
The Company Assets - Company Goodwill and Other Assets
(mm) Company Goodwill. The Company carries on the Business only under the
names "The Forest Industry Online Inc.", "The Forest Industry
Network", "The FIN", "forestindustry.com", "forestindustry.net", and
"forestind.com" and under no other business or trade names. The
Company has the legal right to use its corporate name in the
Province of British Columbia and neither the Company nor any of the
Vendors are aware of any names similar to The Forest Industry Online
in use in any areas where the Business is conducted. None of the
Vendors has any knowledge of any infringement by the Company of any
patent, trademark, copyright or trade secret;
<PAGE>
The Business
(nn) Maintenance of Business. Since the date of the Company Financial
Statements, the Business has been carried on in the ordinary course
and the Company has not entered into any material agreement or
commitment except in the ordinary course; and
(oo) No Ownership of Company. The Company does not own any subsidiary and
does not otherwise own, directly or indirectly, any shares or
interest in any other corporation, partnership, joint venture or
firm.
Non-Merger and Survival
4.2 The representations and warranties of the Vendors contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by the Purchaser, the
representations and warranties of the Vendors shall survive the Closing.
Indemnity
4.3 The Vendors jointly and severally agree to indemnify and save harmless the
Purchaser from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of the Vendors to defend any such claim), resulting from the breach by
any of them of any representation or warranty of such party under this Agreement
or from any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by the Vendors to the Purchaser
hereunder.
ARTICLE 5
COVENANTS OF THE VENDORS
Covenants
5.1 The Vendors jointly and severally covenant and agree with the Purchaser that
they will:
(a) Conduct of Business. Until the Closing, conduct the Business diligently and
in the ordinary course consistent with the manner in which the Business
generally has been operated up to the date of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best efforts
to preserve the Business and the Company Assets and, without
limitation, preserve for the Purchaser the Company's relationships
with their suppliers, customers and others having business relations
with them;
(c) Insurance. Until the Closing, maintain in full force and effect the Company
Insurance Policies;
<PAGE>
(d) Access. Until the Closing, give the Purchaser and its
representatives full access to all of the properties, books,
contracts, commitments and records of the Company relating to the
Company, the Business and the Company Assets, and furnish to the
Purchaser and its representatives all such information as they may
reasonably request; and
(e) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the transfer of the Company Common
Shares to the Purchaser and to preserve and maintain the Company
Assets, including the Company Material Contracts, notwithstanding
the change in control of the Company arising from the purchase of
the Company Common Shares by the Purchaser.
Authorization
5.2 The Vendors hereby agree to promptly cause the Company, upon the request of
the Purchaser, to authorize and direct any and all federal, provincial,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting the Company to release any and all information in
their possession respecting the Company to the Purchaser. The Vendors shall
promptly cause the Company to execute and deliver to the Purchaser any and all
consents to the release of information and specific authorizations which the
Purchaser reasonably requires to gain access to any and all such information.
Survival
5.3 The covenants set forth in this Article shall survive until the Closing for
the benefit of the Purchaser.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Representations and Warranties
6.1 The Purchaser represents and warrants in all material respects to the
Vendors, with the intent that the Vendors will rely thereon in entering into
this Agreement and in completing the transactions contemplated hereby, that:
The Purchaser - Corporate Status and Capacity
(a) Incorporation. The Purchaser is a corporation duly incorporated and validly
subsisting under the laws of the State of Delaware, and is in good standing
with the office of the Secretary of State for the State of Delaware;
(b) Carrying on Business. The Purchaser has not carried on and does not now
carry on any material business activity. The Purchaser has an office in
Vancouver, British Columbia and in no other locations;
(c) Corporate Capacity. The Purchaser has the corporate power, capacity and
authority to enter into and complete this Agreement;
<PAGE>
(d) Reporting Status. The Purchaser Common Shares have been registered pursuant
to s. 12(g) of the Securities and Exchange Act of 1934 (United States);
The Purchaser - Capitalization
(e) Authorized Capital. The authorized capital of the Purchaser consists of
30,000,000 Purchaser Common Shares, $0.0001 par value and 5,000,000 shares
of preferred stock. $0.0001 par value, of which 4,927,040 Purchaser Common
Shares and no shares of preferred stock are presently issued and
outstanding;
(f) No Option. No person, firm or corporation has any agreement or option or
any right capable of becoming an agreement or option for the acquisition of
Purchaser Common Shares or for the purchase, subscription or issuance of
any of the unissued shares in the capital of the Purchaser;
(g) Capacity. The Purchaser has the full right, power and authority to enter
into and complete this Agreement on the terms and conditions contained
herein;
(h) No Restrictions. There are no restrictions on the transfer, sale or other
disposition of the Acquisition Shares contained in the charter documents of
the Purchaser or under any agreement to which the Purchaser is a Party;
The Purchaser - Records and Financial Statements
(i) Charter Documents. The charter documents of the Purchaser have not been
altered since the incorporation of the Purchaser, except as filed in the
record books of the Purchaser;
(j) Books and Records. The books and records of the Purchaser fairly and
correctly set out and disclose in all material respects the
financial position of the Purchaser, and all material financial and
other transactions of the Purchaser, including any and all contracts
and any amendments thereto, have been accurately recorded or filed
in such books and records;
(k) Purchaser Financial Statements. As at the date of this Agreement,
the Purchaser Financial Statements are true and correct and present
fairly and correctly the assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Purchaser as of the
respective dates thereof and have been prepared in substantial
accordance with United States' generally accepted accounting
principles consistently applied;
(l) Purchaser Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of the Purchaser which are not
disclosed in Schedule "I" hereto or reflected in the Purchaser Financial
Statements except those incurred in the ordinary course of business since
the date of the said financial statements, and the Purchaser has not
guaranteed or agreed to guarantee any debt, liability or other obligation
of any person, firm or corporation. Without limiting the generality of the
foregoing, all accounts payable and liabilities of the Purchaser are
described in Schedule "I" hereto;
<PAGE>
(m) No Dividends. No dividends or other distributions on any shares in the
capital of the Purchaser have been made, declared or authorized since the
date of the Purchaser Financial Statements;
(n) No Payments. No payments of any kind have been made or authorized since the
date of the Purchaser Financial Statements to or on behalf of officers,
directors, shareholders or employees of the Purchaser or under any
management agreements with the Purchaser;
(o) No Pension Plans. There are no pension, profit sharing, group insurance or
similar plans or other deferred compensation plans affecting the Purchaser;
(p) No Adverse Events. Since the date of the Purchaser Financial Statements
there has not been any material adverse change in the financial position or
condition of the Purchaser or its liabilities or any damage, loss or other
change in circumstances materially affecting the Purchaser;
(q) Applicable Laws. The Purchaser has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which apply to
it the violation of which would have a material adverse effect on
the Purchaser;
(r) Pending or Threatened Litigation. There is no material litigation or
administrative or governmental proceeding or enquiry pending or
threatened against or relating to the Purchaser nor does the
Purchaser have any knowledge of any deliberate act or omission of
the Purchaser that would form any material basis for any such
action, proceeding or enquiry;
(s) No Bankruptcy. The Purchaser has not made any voluntary assignment
or proposal under applicable laws relating to insolvency and
bankruptcy and no bankruptcy petition has been filed or presented
against the Purchaser and no order has been made or a resolution
passed for the winding-up, dissolution or liquidation of the
Purchaser;
(t) Finder's Fees. The Purchaser is not party to any agreement which
provide for the payment of finder's fees, brokerage fees,
commissions or other fees or amounts which are or may become payable
to any third party in connection with the execution and delivery of
this Agreement and the transactions contemplated herein except as
due to Century Capital Management Ltd.;
Execution and Performance of Agreement
(u) Authorization and Enforceability. The execution and delivery of this
Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser and this Agreement
constitutes a legal, valid and binding obligation of the Purchaser
and is enforceable against it in accordance with its terms;
(v) No Violation or Breach. The performance of this Agreement will not violate
the charter documents of the Purchaser or result in any breach of, or
default under, any agreement to which the Purchaser is a party; and
<PAGE>
The Purchaser - Acquisition Shares
(w) Acquisition Shares. The Acquisition Shares when delivered to the
Vendors shall be validly issued and outstanding as fully paid and
non-assessable shares, subject to the provisions of this Agreement,
and the Acquisition Shares shall be transferable upon the books of
the Purchaser, in all cases subject to the provisions and
restrictions of all applicable securities laws.
Non-Merger and Survival
6.2 The representations and warranties of the Purchaser contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by the Vendors, the
representations and warranties of the Purchaser shall survive the Closing.
Indemnity
6.3 The Purchaser agrees to indemnify and save harmless the Vendors from and
against any and all claims, demands, actions, suits, proceedings, assessments,
judgments, damages, costs, losses and expenses, including any payment made in
good faith in settlement of any claim (subject to the right of the Purchaser to
defend any such claim), resulting from the breach by it of any representation or
warranty of such party under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
by the Purchaser to the Vendors hereunder.
ARTICLE 7
EMPLOYMENT AGREEMENTS
At the Closing, the Company shall enter into the Employment Agreement with
Joe Perraton pursuant to which each of them will provide services to the
Company.
ARTICLE 8
CONDITIONS PRECEDENT
Conditions Precedent in favour of the Purchaser
8.1 The Purchaser's obligations to carry out the transactions contemplated
hereby is subject to the fulfillment of each of the following conditions
precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and delivered
to the Purchaser hereunder will have been so executed and delivered;
(b) pro forma financial statements showing the combined assets,
liabilities, stockholders' equity and results of operations of the
Purchaser and the Company, prepared in prepared in accordance with
United States' generally accepted accounting principles and the
requirements of the Securities and Exchange Commission will have
been delivered to the Purchaser;
<PAGE>
(c) the Purchaser shall have completed its due diligence review of the
affairs of the Company, and shall be satisfied with same in all
material respects;
(d) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Vendors at or prior to the Closing
will have been complied with or performed;
(e) title to the Company Common Shares and Company Assets will be free
and clear of all mortgages, liens, charges, pledges, security
interests, encumbrances or other claims whatsoever;
(f) the Vendors will have transferred the Company Common Shares to the
Purchaser and the Company Common Shares will be issued to the
Purchaser and registered on the books of the Company in the name of
the Purchaser at Closing;
(g) subject to Article 9 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of the Company, its liabilities or the Company
Assets or any damage, loss or other change in circumstances
materially and adversely affecting the Vendors, the Business
or the Company Assets or the Company's right to carry on the
Business, other than changes in the ordinary course of
business, none of which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to the Company or
the Business (whether or not covered by insurance) materially
and adversely affecting the Company, the Business or the
Company Assets; and
(h) the transactions contemplated hereby shall have been approved by all
other regulatory authorities having jurisdiction over the subject
matter hereof, if any.
Waiver by the Purchaser
8.2 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of the Purchaser and any such condition may be waived in
whole or in part by the Purchaser at or prior to Closing by delivering to the
Vendors a written waiver to that effect signed by the Purchaser. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing the Purchaser shall be released from all obligations
under this Agreement.
Conditions Precedent in Favour of Vendors
8.3 The obligation of the Vendors to carry out the transactions contemplated
hereby is subject to the fulfillment of each of the following conditions
precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and delivered
to the Vendors hereunder will have been so executed and delivered;
<PAGE>
(b) all of the terms, covenants and conditions of this Agreement to be
complied with or performed by the Purchaser at or prior to the
Closing will have been complied with or performed;
(c) the Purchaser will have delivered the Acquisition Shares to the
Vendors and the Acquisition Shares will be registered on the books
of the Purchaser in the name of the Vendors at Closing;
(d) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances
or other claims whatsoever;
(e) the board of directors of the Purchaser shall have appointed Marc White and
Joe Perraton as directors of the Purchaser; and
(f) the Purchaser shall have received duly executed Subscriptions for
not less that 750 Purchaser Preferred Shares pursuant to the Private
Placement and shall have received in full the subscription funds
therefore, such funds being held in escrow pending Closing.
Waiver by Vendors
8.4 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of the Vendors and any such condition may be waived in
whole or in part by the Vendors at or prior to the Closing by delivering to the
Purchaser a written waiver to that effect signed by the Vendors. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing the Vendors shall be released from all obligations
under this Agreement.
Nature of Conditions Precedent
8.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favour of the other party or parties set forth in
this Article.
Termination
8.6 Notwithstanding any provision herein to the contrary, if Closing does not
occur on or before January 31, 2000 this Agreement will be at an end and will
have no further force or effect, unless otherwise agreed upon by the parties in
writing.
Confidentiality
8.7 Notwithstanding any provision herein to the contrary, the parties hereto
agree that the existence and terms of this Agreement are confidential and that
if this Agreement is terminated pursuant to the preceding section the parties
agree to return to one another any and all financial, technical and business
documents delivered to the other party or parties in connection with the
negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from the Company and the
contents thereof confidential and not utilize nor reveal or release same,
<PAGE>
provided, however, that the Purchaser will be required to issue one or more news
releases and file a Current Report on Form 8-K with the Securities and Exchange
Commission respecting the proposed share purchase contemplated hereby.
ARTICLE 9
RISK
If any material loss or damage to the Business occurs prior to Closing and
such loss or damage, in the Purchaser's reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, the Purchaser shall,
within seven (7) days following any such loss or damage, by notice in writing to
the Vendors, at its option, either:
(a) terminate this Agreement, in which case no party will be under any further
obligation to any other party; or
(b) elect to complete the purchase of the Company Common Shares and the
other transactions contemplated hereby, in which case the proceeds
and the rights to receive the proceeds of all insurance covering
such loss or damage will, as a condition precedent to the
Purchaser's obligations to carry out the transactions contemplated
hereby, be vested in the Company or otherwise adequately secured to
the satisfaction of the Purchaser on or before the Closing Date.
ARTICLE 10
CLOSING
Closing
10.1 The purchase and sale of the Company Common Shares and the other
transactions contemplated by this Agreement will be closed at the Place of
Closing in accordance with the closing procedure set out in this Article.
Documents to be Delivered by Vendors
10.2 On or before the Closing, the Vendors will deliver or cause to be delivered
to the Purchaser:
(a) a certificate of status in respect of the Company and Teaco and a
certificate of incumbency in respect of the authorized signatories of
Teaco;
(b) certified copies of such resolutions of the directors of Teaco as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement;
(c) the original or certified copies of the charter documents of the
Company and all corporate records documents and instruments of the
Company, the corporate seals of the Company and all books and
accounts of the Company;
(d) certificates representing the Company Common Shares, duly endorsed
for transfer to the Purchaser, together with a duly executed share
certificate respecting the Company Common Shares issued to the
Purchaser and recorded in the share register of the Company;
<PAGE>
(e) all reasonable consents or approvals required to be obtained by the
Vendors and the Company for the purposes of validly transferring the
Company Common Shares to the Purchaser and preserving and
maintaining the interests of the Company under any and all Company
Material Contracts and in relation to the Company Assets;
(f) certified copies of such resolutions of the shareholders and
directors of the Company as are required to be passed to authorize
the execution, delivery and implementation of this Agreement;
(g) an acknowledgement from each of the Vendors of the satisfaction of the
conditions precedent set forth in section 8.3 hereof;
(h) the Employment Agreement, duly executed by the Company and Joe Perraton;
and
(i) such other documents as the Purchaser may reasonably require to give
effect to the terms and intention of this Agreement.
Documents to be Delivered by the Purchaser
10.3 On or before the Closing, the Purchaser shall deliver or cause to be
delivered to the Vendors:
(a) a certificate of status in respect of the Purchaser and a certificate of
incumbency in respect of the authorized signatories of the Purchaser;
(b) share certificates representing the Acquisition Shares duly registered in
the names of the Vendors;
(c) certified copies of such resolutions of the directors of the Purchaser as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement, the execution and delivery of the
Subscriptions and the closing of the Private Placement, the appointment of
the Significant Shareholders to the board of directors of the Purchaser,
the change of the authorized signatories on the Purchaser's bank accounts,
and such other resolutions as are reasonably required by the Vendors to
complete this Agreement and the transactions contemplated hereby;
(d) an acknowledgement from the Purchaser of the satisfaction of the conditions
precedent set forth in section 8.1 hereof;
(e) a certificate signed by an officer of the Purchaser confirming the
accuracy, at and as of the Closing Date, of the representations and
warranties of the Purchaser contained in Article 6 hereof;
(f) an opinion from counsel for the Purchaser confirming the accuracy,
at and as of the Closing Date, of paragraphs 6.1(a), (c), (d), (h),
(u), (w) of the Share Exchange Agreement, that the Acquisition
Shares have been validly issued to the Vendors in compliance with
all applicable United States' laws and regulations and that the form
of Acquisition Share certificate have been duly authorized, executed
and delivered by the Purchaser, are in compliance with the laws of
Delaware, and do not conflict with articles of the Purchaser;
<PAGE>
(g) such other documents as the Vendors may reasonably require to give
effect to the terms and intention of this Agreement.
ARTICLE 11
GENERAL PROVISIONS
Arbitration
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of Vancouver, British
Columbia. The arbitration panel shall consist of a single arbitrator selected by
the joint agreement of the parties to the dispute; provided that if the parties
cannot agree upon the identity of a single arbitrator within fifteen (15) days,
then the arbitration panel shall consist of three (3) arbitrators, one (1) of
whom shall be appointed by each party within ten (10) days and the third duly
appointed by mutual agreement of the two (2) arbitrators so appointed by the
parties; provided further that if the two arbitrators cannot select the third
arbitrator within ten (10) days after their appointment, the selection of the
third arbitrator shall be made in accordance with the general rules of
arbitration in relation to arbitrations in the Province of British Columbia (the
"Rules"). If no such arbitrator is appointed within ten (10) days of such
request, either party may apply to a court having jurisdiction to make such
appointment. Once the arbitration panel has been selected, the arbitration of
the dispute shall be conducted in English in accordance with the Rules in the
City of Vancouver, British Columbia, unless otherwise provided or limited by the
Rules. The arbitrator(s) shall give each of the parties a fair opportunity to
prepare, including pre-arbitration hearing discoveries, and present its position
with respect to the dispute, and each party shall be entitled to call witnesses
to testify, examine and cross-examine witnesses that the other party calls to
testify, introduce documents and other materials and submit written statements
of position and arguments. The arbitration panel shall make a final
determination, to be provided in writing to each party, that resolves the
dispute and includes an allocation of the aggregate fees, costs and expenses of
the arbitration between the parties to the dispute, such allocation to be made
in the sole discretion of the arbitration panel after giving due consideration
to the relative merits of the parties positions in the dispute. All results of
the arbitration proceedings shall be final, conclusive and binding on all
parties to this Agreement, and shall not be subject to judicial review. Judgment
upon the award rendered by the arbitrator may be entered in the Province of
British Columbia or any other court having competent jurisdiction. For the
purposes of this section, the Vendors shall collectively be deemed to be one
party, and their selection of an arbitrator or concurrence therein shall be made
by notice in writing duly executed by a simple majority of the Vendors.
Notice
11.2 Any notice required or permitted to be given by any party will be deemed to
be given when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid single certified or registered mail, or
telecopier. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by telecopier shall be deemed to have been received on
the actual date of delivery.
<PAGE>
Addresses for Service
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) the Vendors:
Teaco Properties Ltd.
649 Belle View Place
Nanaimo, British Columbia
V9V 1B5
Telecopier: (250) 751-7966
Joe Perraton
7491 Elizabeth Way
Lantzville, British Columbia
V0R 2H0
Lara Perraton
485 Howard Avenue
Nanaimo, British Columbia
V9R 3S2
Lang Michener Lawrence & Shaw
Attention: Leo Raffin and Susan Goscoe
500 Royal Centre
1055 West Georgia Street
Vancouver, British Columbia
V6E 4N7
Telecopier: (604) 685-7084
(b) the Purchaser:
1650, 200 Burrard Street
Vancouver, British Columbia
V6C 3L6
Telecopier: (604) 689-5320
Change of Address
11.4 Any party may, by notice to the other parties change its address for notice
to some other address in North America and will so change its address for notice
whenever the existing address or notice ceases to be adequate for delivery by
hand. A post office box may not be used as an address for service.
Further Assurances
11.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
<PAGE>
Time of the Essence
11.6 Time is expressly declared to be the essence of this Agreement.
Entire Agreement
11.7 The provisions contained herein constitute the entire agreement among the
Vendors and the Purchaser respecting the subject matter hereof and supersede all
previous communications, representations and agreements, whether verbal or
written, among the Vendors and the Purchaser with respect to the subject matter
hereof.
Enurement
11.8 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Assignment
11.9 This Agreement is not assignable without the prior written consent of the
parties hereto.
Counterparts
11.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
Applicable Law
11.11 This Agreement is subject to the laws of the Province of British Columbia
and the laws of Canada applicable therein and, subject to section 11.1 hereof,
the parties hereto to attorn to the exclusive jurisdiction of the Courts of the
Province of British Columbia.
Independent Legal Advice
11.12 The parties hereto acknowledge that they have each received independent
legal advice with respect to the terms of this Agreement and the transactions
contemplated herein or have knowingly and willingly elected not to do so. The
parties hereto further acknowledge that this Agreement has been prepared by
Century Capital Management Ltd. as a convenience to the parties only, and that
Century Capital Management Ltd. has not provided any of the parties hereto with
any professional advice with respect to this Agreement.
Novation
11.13 This Agreement supercedes and novates the Share Exchange Agreement made as
of the 24th day of December, 1999 between the parties hereto, which agreement is
hereby agreed by the parties hereto to be cancelled and of no further force or
effect.
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
AUTOEYE INC.
By: _____________________________
- ------------------------------
Witness Authorized Signatory
Name
Address
TEACO PROPERTIES LTD.
By: _____________________________
- ------------------------------
Witness Authorized Signatory
Name
Address
______________________________________
- ------------------------------
Witness JOE PERRATON
Name
Address
_____________________________________
- ------------------------------
Witness LARA PERRATON
Name
Address
This is Page 24 to the Share Exchange Agreement dated January 20, 2000 among
Autoeye Inc., Teaco Properties Ltd., Joe Perraton and Lara Perraton.
CONSENT OF ATTORNEYS
Reference is made to the Registration Statement of forestindustry.com, Inc. (the
"Company"), whereby certain Selling Shareholders propose to sell up to 2,361,721
shares of the Company's common stock. Reference is also made to Exhibit 5
included in the Registration Statement relating to the validity of the
securities proposed to be sold.
We hereby consent to the use of our opinion concerning the validity of the
securities proposed to be issued and sold.
Very truly yours,
HART & TRINEN
William T. Hart
Denver, Colorado
May 18, 2000
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated November 5, 1999 in the Registration Statement (Form
SB-2) and related Prospectus of forestindustry.com, Inc. for the registration of
2,361,721 shares of its common stock.
"Watson Dauphinee & Masuch"
Chartered Accountants
Vancouver, Canada
May 17, 2000
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated June 16, 1999 in the Registration Statement on (Form
SB-2) and related Prospectus of forestindustry.com, Inc. (formerly Autoeye Inc.)
for the registration of up to 420,000 shares of its common stock issuable upon
the conversion of Series A convertible preferred stock and 237,500 shares of its
common stock to be offered for resale.
Vancouver, Canada ERNST & YOUNG, LLP
May 18, 2000 Chartered Accountants
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001052671
<NAME> forestindustry.com, Inc.
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