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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12 (b) or (g) of the Securities Exchange Act of 1934
Go Call, Inc.
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(Name of Small Business Issuer in its charter)
Delaware 65-0794980
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Plaza 138, Unit 5, Route 138, KM 30, Kahnawake, Quebec, Canada, J0L1B0
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(Address of principal executive offices) (Zip Code)
450-691-3051
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(Issuer's telephone number, including area code)
with copies to:
Matthias & Berg LLP
Jeffrey P. Berg, Esq.
1990 South Bundy Drive, Suite 790
Los Angeles, California 90025
(310) 820-0083
Securities to be registered under Section 12(b) of the Act:
Name of each exchange on
Title of each class which each class is to be
to be so registered registered
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None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of class)
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AVAILABLE INFORMATION
Upon this Registration Statement becoming effective, the Company will
become subject to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") and in accordance therewith will file
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at its New York Regional Office, Room 1300, 7 World
Trade Center, New York, New York 10048; and at its Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at prescribed rates. In addition,
such materials may be accessed electronically at the Commission's site on the
World Wide Web, located at http:/www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other reports as the Company
deems appropriate or as may be required by law.
This Amended Registration Statement on Form 10-SB/A (the "Registration
Statement") may be deemed to contain forward-looking statements. Forward-looking
statements in this Registration Statement or hereafter included in other
publicly available documents filed with the Securities and Exchange Commission
(the "Commission"), reports to the Company's Stockholders and other publicly
available statements issued or released by the Company involve known and unknown
risks, uncertainties and other factors which could cause the Company's actual
results, performance (financial or operating) or achievements to differ from the
future results, performance (financial or operating) or achievements expressed
or implied by such forward-looking statements. Such future results are based
upon management's best estimates based upon current conditions and the most
recent results of operations. These risks include, but are not limited to, the
risks set forth herein, each of which could adversely affect the Company's
business and the accuracy of the forward-looking statements contained herein.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Go Call, Inc., a Delaware corporation (the "Company"), together with
its wholly-owned subsidiaries, Go Cash, Inc., a Turks and Caicos corporation,
and Go Call Canada, Inc., an Ontario (Canada) corporation, (collectively, the
"Company") is principally a provider of services to businesses engaged in
electronic commerce on the Internet ("E-commerce"). Such services include
research and development of E-commerce technology, management, marketing and
long-range planning. The Company also has approximately a 92% interest in
Country Star Restaurants, Inc., a Delaware corporation, which operates a country
music theme restaurant in California.
Go Call Canada, Inc., an Ontario corporation ("Go Call Canada"), is a
wholly-owned subsidiary of the Company which is principally a provider of
services to businesses engaged in "E-commerce, including services to online
casinos. Such services include research and development of E-commerce
technology, management, marketing and long-range planning.
Go Cash, Inc., a Turks and Caicos corporation ("Go Cash"), is a
wholly-owned subsidiary of the Company which performs all of the functions of
the Company's business of providing turnkey management services to electronic
casinos. These services are performed outside the United States. Go Cash's
services include ongoing marketing of the casino's business and performing
calculations, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, storage of data on individual
players, administration of customer support service, continuous update of
website and addition of new games. Certain specific services, such as processing
of credit card transactions, are outsourced to unrelated third parties.
HISTORY OF THE COMPANY
The Company was incorporated on March 1, 1994, as Omni Advantage, Inc.,
a Louisiana corporation. The Company formed a Delaware subsidiary, Go Call, Inc.
("Go Call"), and merged into such subsidiary on February 17, 1998. Go Phone
Inc., an Ontario (Canada) corporation ("Go Phone"), was formed on August 10,
1995 and engaged in telecommunications business, including sale of long distance
time, sale of prepaid telephone cards and operation of an Internet service
provider for the Ontario market. Pursuant to an agreement effective February 24,
1998, the Company acquired all of the issued and outstanding shares of common
stock of Go Phone in which the Go Phone shareholders received 5,906,175 shares
of Go Call, which represented approximately seventy-two percent (72%) of the
Company's issued and outstanding shares of Common Stock.
Pursuant to a Stock Acquisition Agreement dated as of March 11, 1999,
the Company acquired approximately 92% of the issued and outstanding common
stock of Country Star Restaurants ("Country Star"), a Delaware corporation, from
the three principal shareholders of Country Star in exchange for 4,552,751
shares of the Company's Common Stock, which represented twenty-three percent
(23%) of all of the Company's issued and outstanding Common Stock. The Company
announced its intention to the remaining shareholders of Country Star to merge
Country Star into the Company in exchange for shares of the Company's Common
Stock. After assuming control of Country Star's operations, the Company advanced
approximately $250,000 to Country Star in exchange for a promissory note secured
by all of Country Star's assets. Management of the Company subsequently
determined that the Company had not received complete disclosure of Country
Star's operations and, pursuant to a repurchase agreement dated as of August 5,
1999, redeemed the 4,552,751 shares of its Common Stock for a cash payment of
$728,440. As of August 19, 1999, Country Star and the Company agreed to
terminate plans to merge the two companies. The Company has announced its
intention to dispose of its interest in Country Star as and when a suitable
buyer becomes available. No assurance can be given that the Company will be able
to able to sell its interest in Country Star on terms acceptable to the Company,
or at all.
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BUSINESS OF THE COMPANY
BUSINESS PLAN
As of February, 1998, the principal business of the Company was the
marketing of telecommunications services, a business which had been carried out
by Go Phone. During the remainder of 1998, management of the Company explored a
number of new business possibilities pursuant to its goal of exploiting its
technological and marketing experience to expand into a variety of E-commerce
businesses. Thus, while the Company intends to draw on its skills to provide
services to a number of different companies engaged in E-commerce, there is no
specifically targeted industry or business segment for such potential customers
and co-venturers. The Company recognizes that to carry out its goal it will be
necessary to enter into a number of E-commerce ventures long before they are
proven to be successful and, therefore, that an essential element of its
business plan involves entering into of a number of new businesses and,
inevitably, the shelving of those which do not meet the Company's expectations.
In addition, because of the need to act quickly, the Company will require a
significant amount of outside financing to carry out its business plan. Only a
small number of the E-commerce ventures entered into by the Company have shown
enough revenue or promises of revenue for the Company to continue developing
them. See "Description of Business - Competition."
As of the date of this Registration Statement, the Company's has two
principal businesses, one active business and one in development. Its principal
active business: is providing services to unrelated Internet gaming businesses.
Its principal business in development is Go Indexus, a sophisticated, constantly
updated E-commerce "yellow pages." In addition, the Company operates four other
businesses, none of which generates significant revenue: (i) Marketing personal
pagers which, in addition to the usual services, carry paid advertisements,
including information on odds for sports books; (ii) operation of a resort hotel
in the Dominican Republic; (iii) operation of a country music theme restaurant
in California; and (iv) Go Internet Kiosks, which are stand-alone,
Internet-connected computers available to the public for a fee and which are
intended to be located, among other locations, in convenience stores. In
addition, the Company is operating GoBannerAd.com, which provides services to
prepare and market Internet "banner" advertisements, pending closing of a sale
of that business pursuant to an agreement dated August 16, 1999. As of the date
of this Registration Statement, the gaming service business provides almost all
of the Company's revenue; the technology for Go.Indexus is still in the
development stage; and the Company has placed the Internet Kiosks and the
Banner.Ad businesses on hold, pending entering into arrangements with joint
venture partners to share the development and marketing responsibilities. The
Company estimates that the Go.Indexus technology may require financing of
approximately $2,000,000 and six months of development time to bring the
technology to the point where it can be commercially marketable, of which no
assurance can be given. No assurance can be given that any of the businesses
other than that providing services to gaming companies will generate revenue to
the Company or that the amount of revenue received by the Company from the
provision of services to the gaming industry will be adequate to sustain
operations.
BACKGROUND OF INTERNET BUSINESS
The Internet has become an important medium for communication, news,
entertainment and commerce. As a result, it is experiencing rapidly increasing
public awareness, substantial growth and acceptance on a global scale. A 1998
report issued by the United States Department of Commerce estimated that the
number of Internet users worldwide is expected to increase from approximately
100 million at year end 1997 to over 320 million by the year 2002. The same
report projects even higher growth rates for traffic and electronic commerce.
E-commerce is expected to increase from an estimated $8.6 billion in 1998 to
approximately $23.3 billion in 2001. In addition, this growth is being driven by
rapid technological advances such as the installation of more secure networks,
the introduction of better and higher performance Internet access options and
the improvement of PCs, as well as the increased penetration of PCs in both the
home and the workplace.
One of the basic growth factors of the Internet is its ability to
deliver information in ways that are not possible using traditional media
sources such as broadcast or print media. Unlike these traditional sources the
Internet is capable of combining textual, graphical, streamed audio and streamed
video formats in a dynamic, interactive and real-time environment. This has
created new programming and content delivery opportunities that are not only
capturing the interest of the general public but also shifting user preferences
away from traditional news and entertainment sources.
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A second growth factor of the Internet is the fact that it is rapidly
becoming a powerful and credible new commerce channel. The Internet has already
had a significant impact on consumer and business transactions in a broad range
of industries, including financial services, particularly online securities
trading, and numerous consumer product sectors. Individuals are showing
increasingly strong preferences to consummate transactions online rather than
via traditional means such as over the phone or in person.
The Company believes that because of the Internet we will see a
profound difference in the way both businesses and individuals engage in trade,
and consumers will use various applications of E-commerce trading in their
everyday activities, from grocery shopping to stock trading, booking travel,
obtaining home loans, buying a new car, from telephone calls to interactive
videoconferencing in their own homes.
Most E-commerce businesses exploit the interactive nature and the
instantaneous communications of the Internet to bypass the relative
inefficiencies of existing marketing methods. Thus, for example, a resident of
the United Kingdom can engage in online gaming from the privacy of his home,
without the necessity of traveling to the site of a casino. At present, there
may be thousands of businesses seeking means to market their products and
services over the Internet. It is the Company's goal to identify a handful of
E-commerce businesses, either in the planning or start-up stage, which it
perceives have a reasonable chance for success and which can benefit from some
of the skills and assets which the Company has to offer.
THE COMPANY'S SERVICE BUSINESS TO OFFSHORE GAMING BUSINESSES
The Company does not own any casinos and does not accept or place any
wagers; rather, Go Cash provides services to online casinos owned by unrelated
third parties which are located and incorporated outside the United States. The
casino service business commenced in the last four months of 1998. For the
ten-month period from January 1, 1999 through October 31, 1999, the Company
processed approximately $50 million in gross wagers, which generated
approximately $1.5 million in revenue to the Company. The Company provides these
services on an ongoing basis to three unrelated foreign companies which own and
operate online gaming businesses. The Company services the gaming operations
owned by GoCasino.com and ImperialDragonCasino.com, including purchasing or
leasing the necessary software to manage the business. The Company's services
include ongoing marketing of the casino's business, performing calculations and
determining odds, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, storage of data on individual
players, administration of customer support service, continuous update of
website and addition of new games. The processing of the wagering transactions
for GoCasino.com and ImperialDragonCasino.com is performed outside the United
States by its subsidiary Go Cash. Certain specific services, such as processing
of credit card transactions, are outsourced to unrelated third parties.
The Company began its casino service operation in September, 1998, with
GoCasino.com, an Antigua corporation. In August, 1999, the Company began
providing services to ImperialDragonCasino.com, an Antigua corporation, which
intends to exploit markets in Asia.
At the beginning of November, 1999, the Company launched its business
of providing services to an unaffiliated third party sports wagering company
("Sports Book") in which customers can place bets on major sports events and can
designate a charitable organization to receive an amount equal to 10% of such
customer's losses. Although the Company's experience in servicing its existing
casino customers should be a significant advantage in servicing the sports book,
there are important differences. In general, casino games involve a long-term
percentage which works against the player and generates steady profits from
operations for the casino. With rare exceptions, this advantage should provide a
stable and predictable profit to the casino. In sports betting, there is a
theoretical percentage which represents the advantage a bookmaker would have if
the odds guaranteed a constant commission regardless of the outcome. Thus, a
player might wager $11 to win $10. While the profit margin may be greater in
sports wagering than in casino games, no assurance can be given that any sports
book, including one which has contracted with the Company, will generate gross
profits from operations, and, if not, the Company would receive no revenue for
its services.
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PAGER BUSINESS
In March, 1999, the Company entered into an agreement with PageMaster
Corporation ("PageMaster") under which PageMaster and the Company are engaging
in a mutual promotion of their respective businesses. PageMaster provides pagers
to the Company without cost as long as such pagers are marketed by the Company
to persons who sign up for at least one year's pager service. The Company will
distribute the pagers free of charge and will be entitled to run "string"
advertisements on the pagers indefinitely. Such string ads will include
information on odds on major sporting events, which are designed to stimulate
interest in wagering on the Sports Book serviced by the Company.
INDEXUS
The Company is developing software for an Internet "yellow pages" which
enables companies to provide instantly updated information on their services and
products prices to potential customers. Current search-engine based directories
are incapable of such instantaneous updating and, in the opinion of management,
are far less useful to companies and consumers alike. The Company intends to
charge participating companies a flat annual fee for listing in the searchable
directory. In addition, the Company intends to sell banner advertisements on the
search engine website. The Company estimates that the development and marketing
of Indexus will require approximately five months more work and an expenditure
of approximately $2,000,000. No assurance can be given that the development will
result in a commercially viable system or that, if it does, the Company will
receive revenue from exploitation of Indexus.
CARIBBEAN RESORT
In November 30, 1997, the Company acquired a hotel property ("Resort
Property") in the Dominican Republic for 3,360,000 shares of Common Stock of Go
Phone, which constituted approximately 18% of the issued and outstanding Common
Stock of Go Phone. In addition to deriving revenue from tourists referred by
travel agents, the Company offers one-week packages as promotions for potential
customers of the Company's other activities, principally Internet gaming.
OTHER OPERATIONS
The following four businesses, which involve little activity and
virtually no revenue to the Company, are either being phased out or have been
placed on hold pending a decision by management whether or not to expend
resources to develop them.
TELECOMMUNICATIONS
The Company continues to provide minimal telecommunication services in
the Greater Toronto, Ontario area. This business was formerly the principal
operation of Go Phone; and management of the Company does not intend to expend
money and personnel on expansion.
INTERNET CAFE
The Company operates an "Internet Cafe" in Kitchener, Ontario, where
customers can eat, drink and rent time at computer stations to surf the Internet
and check e-mail. The Company does not plan to build more such cafes and uses
the existing cafe solely as a testing ground for products and services offered
by the Company in connection with its other operations.
INTERNET KIOSKS
Internet Kiosks are stand-alone computer stations, much like public
telephones, where a consumer can log on to the Internet and send and receive
e-mail. These are intended to be placed in high traffic areas, such as
convenience stores and airports. The Company is beta testing these kiosks and is
considering different methods of marketing them.
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INTERNET BANNER SWAP ADVERTISEMENTS
The Company engages in swap advertising on the Internet, wherein the
Company provides free banner advertising on the websites marketed by the Company
in exchange for free banner ads on websites operated by third parties. This
division was sold, for shares of common stock of the purchaser, under a contract
dated August 16, 1999 to an unaffiliated third party, but this sale has not yet
closed. The purchaser has demanded delivery of the division and closing of the
transaction. Pending the resolution of these issues, the Company continues to
operate the banner ad business. See "Legal Proceedings."
YEAR 2000
The Year 2000 ("Y2K") risk is the result of computer programs being
written using two digits rather than four digits to define the applicable year.
Computer programs that have sensitive software may recognize a date using "00"
as the year 1900 rather than the Y2K. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with Y2K requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
Based on an internal assessment, the Company believes that its software
programs, either leased or purchased from outside vendors, are Y2K compliant or
will be by December 31, 1999. The Company began assessing its state of Y2K
readiness during late 1998. This included reviewing the Y2K compliance of
third-party software vendors and of those companies which perform critical
services for the Company, including credit card processing of wagering
transactions. The Company will continue to require its service providers and
vendors of software to provide assurances of their Y2K compliance.
As of the date of this Registration Statement, the Company has incurred
minimal costs in identifying and evaluating Y2K compliance issues. Most of the
Company's expenses have related to, and are expected to continue to relate to,
the operating costs associated with time spent by employees in the evaluation of
Y2K compliance matters. At this time, the Company does not possess the
information necessary to estimate the potential costs of future revisions to its
software packages should revisions be required or the replacement of third-party
software, if any, that are determined to not be Y2K compliant. Although the
Company believes that its software programs, leased or purchased from outside
vendors are either already Y2K compliant or will be by December 31, 1999,
failure to identify non Y2K compliant software could have a material and adverse
effect on the Company's business, results of operations and financial condition.
INTELLECTUAL PROPERTY
In developing credit card transaction logistics for GoCasino.com and
ImperialDragonCasino.com, both Antigua corporations, Go Cash purchased or leased
publicly available software technologies from unrelated third parties and then
combined such software into systems of its own design. Management of the Company
believes that its application of such software provides the Company with a
competitive advantage over other companies in the same business. For example,
winners of wagers on GoCasino.com and ImperialDragonCasino.com receive credits
to their account automatically and instantaneously for their winnings. Many
other casino systems require some human intervention before such winnings are
credited. Although the Company has no proprietary interest in the component
elements of the Company's technology, the method of combining such software does
constitute a valuable trade secret which could take time for a competitor to
replicate. If a well-financed competitor were able to reproduce the Company
software application system, it could have an adverse effect on the Company's
competitive position in the short run.
SALES AND MARKETING
The marketing goals of the Company are to expand the already created
and operating business of servicing online wagering businesses and to seek other
opportunities for new E-commerce businesses. The Company has focused on
identifying existing and potential owners of online wagering businesses, that
may not be in a position to handle all of the service and funds transfer
problems of these businesses and want to outsource their operations and not
assume the significant overhead associated with such business, particularly in
connection with Y2K compliance.
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Because the Company is experienced in all aspects of servicing online
wagering operations, management intends to concentrate its marketing on groups
of individuals and companies who wish to expend or to enter the Internet
wagering industry but who do not have sufficient experience or technological
resources for such steps. Management believes that its current strategy of
concentration on: (i) the exploitation of this niche market consisting of small
to medium-sized wagering businesses that have not achieved adequate economy of
scale to operate their own in-house programs and systems; and (ii) the provision
of personalized customer-service will fuel its expansion in this growing
industry. However, no assurance to this effect can be given.
COMPETITION
The E-commerce industry in which the Company's business operates is
highly competitive. A great many companies are actively exploiting the perceived
opportunities in Internet-based businesses, including the businesses in which
the company is engaged. Some of the companies with which the Company competes
are substantially larger, have more substantial histories, backgrounds,
experience and records of successful operations, greater financial, technical,
marketing and other resources, more employees and more extensive facilities than
the Company has or will have in the foreseeable future. The Company's ability to
compete effectively may also depend on the availability of capital. Many of the
Company's competitors have access to significantly greater capital and
management resources then does the Company.
The Company believes that the key to establishing and maintaining a
competitive position in the E-commerce business will be the ability to identify
new E-commerce businesses which have a good chance of success, to apply the
Company's skills in software applications for managing and servicing such
businesses and in marketing such businesses and to do all of this before other
companies perceive the same business opportunity. Thus, the key to the company's
competitive position may be its ability to act quickly. This, in turn, will
require capital resources to enable the Company to seize opportunities before
its competitors. The Company will have to obtain outside financing for such
resources, for which no assurance can be given. See "Business - Capital
Requirements."
EMPLOYEES
As of November 16, 1999, except for Country Star, the Company had 12
full-time and part-time employees, consisting of 1 management person and 11
staff persons. The staff persons work principally at the Company's Internet
Cafe. Except for the chief executive officer, the Company relies on outside
consultants to perform all the administrative and management functions of the
Company; at present the Company has 7 outside consultants for these purposes.
Country Star employs 62 part-time service employees and 5 full-time staff
persons. The Company considers its employee relationships to be satisfactory.
None of the Company's employees is a member of any labor union and the Company
has never experienced any business interruption as a result of any labor
disputes.
REGULATION OF INTERNET WAGERING
Although the Company provides services to GoCasino.com and
ImperialDragonCasino.com, it does not own any gaming establishments. The
headquarters and service operations of Go Cash are all located and carried out
outside the United States. Gaming activities carried out by other companies
which either are or are perceived to be located in the United States are subject
to extensive statutory and regulatory control by both state and federal
authorities, and are likely to be significantly affected by any changes in the
political climate and economic and regulatory policies. Such changes may have a
material adverse impact on the business of the casinos with which the Company
does business and, therefore, with the business of the Company itself.
Management of the Company believes that the Company's activities
conform to those gaming laws and regulations as currently applied, although no
assurance can be given to that effect, especially since there is very little
clear statutory and case law authority. Like other companies involved with
gaming business, the Company may face the risk of either civil or criminal
proceedings brought by governmental or private litigants who disagree with the
Company's interpretation of the applicable laws. Because there is little guiding
authority, there is a risk that the Company could lose such lawsuits or actions
and be subject to significant damages or civil or criminal penalties.
The Company intends to comply with all applicable laws and regulations,
including the proposed Kyl bill, if enacted, and will monitor proposed
regulations and legislation that would affect its business.
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International expansion of the Go Cash's business, including in
particular the Asian market serviced by ImperialDragonCasino.com may be subject
to regulation in those countries in which it is made available. The Company
believes that the casinos set up and serviced by the Company can operate, or
license technology, in numerous jurisdictions that allow telephone and account
wagering, such as Canada, Mexico, the United Kingdom, Australia, and Hong Kong.
However, the Company may not be able to obtain the approvals necessary to market
its services in such jurisdictions.
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RISK FACTORS
THE SECURITIES ISSUED BY THE COMPANY ARE HIGHLY SPECULATIVE AND INVOLVE
A HIGH DEGREE OF RISK AND SUBSTANTIAL DILUTION. AN INVESTMENT IN THESE
SECURITIES SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. IN ADDITION TO THE FACTORS SET FORTH ELSEWHERE IN THIS
REGISTRATION STATEMENT, PROSPECTIVE INVESTORS SHOULD GIVE CAREFUL CONSIDERATION
TO THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING ANY SUCH SECURITIES.
THIS REGISTRATION STATEMENT MAY BE DEEMED TO CONTAIN FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS IN THIS REGISTRATION STATEMENT OR
HEREAFTER INCLUDED IN OTHER PUBLICLY AVAILABLE DOCUMENTS FILED WITH THE
COMMISSION, REPORTS TO THE COMPANY'S STOCKHOLDERS AND OTHER PUBLICLY AVAILABLE
STATEMENTS ISSUED OR RELEASED BY THE COMPANY INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE
RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FUTURE RESULTS ARE BASED UPON
MANAGEMENT'S BEST ESTIMATES BASED UPON CURRENT CONDITIONS AND THE MOST RECENT
RESULTS OF OPERATIONS. THESE RISKS INCLUDE, BUT ARE NOT LIMITED TO, RISKS SET
FORTH HEREIN, EACH OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND
THE ACCURACY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN.
HIGH-RISK BUSINESS. The Company's business involves identifying and
exploiting E-commerce business opportunities in a manner that is more efficient
and more timely than its competitors. Thus, the success of the Company depends
in significant part on the ability of its management to make critical judgments
as to which potential E-commerce businesses have the potential to be successful
and present an opportunity for the Company to employ its skills and assets to
participate therein. Such judgments are difficult and involve taking significant
risks. Even where an E-commerce business proves initially to be successful, the
Company must make additional critical judgments to maintain market position in
an extremely competitive environment. Since February, 1998, the Company has
engaged in a number of different potential businesses, only one of which has
generated significant revenue to the Company and most of which are dormant.
Although the revenue generated from Go Cash's credit card logistics service
business has increased revenue since September, 1998, management has had to make
constant changes and new capital investments to maintain that growth. As of the
date of this Registration Statement, management intends to expand its credit
card logistics service business to other businesses, including bingo and
wagering on sports events. No assurance can be given that the Company's
decisions will prove correct often enough to maintain and build its E-commerce
business. See "Description of Business - Business of the Company - Business
Plan."
LACK OF PROFITABILITY AND HISTORY OF LOSSES. The Company incurred
losses of $991,259 and $$859,464 for the fiscal years ended December 31, 1997
and 1998, respectively, and $415,039 for the nine-month period ended September
30, 1999. The Company expects to continue to incur operating losses over at
least the next twelve months as it continues to devote significant financial
resources to development activities and as the Company expands its operations
generally. In 1997, 1998 and 1999, the Company has been financing its cash flow
needs through the sale of its Common Stock, and no assurance can be given that
the Company will be able to . In order to achieve profitability, the Company
will have to identify and exploit E-commerce ventures which are accepted on a
commercial basis, and no assurance can be given that the Company will be able to
accomplish this goal or, even if it does, that the Company will operate
profitably in the future. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Description of Business" and "Financial
Statements."
NEED TO ENGAGE IN A NUMBER OF VENTURES. The Company's business assets
consist of its technological and marketing skills as applied to E-commerce
operations. In order to exploit these assets pursuant to the Company's business
plan, the Company will have to enter into a number of different E-commerce
ventures long before such ventures are proven to be successful. Inevitably, a
number of such ventures will not be successful and will have to be shelved by
the Company. No assurance can be given that the Company will be able to enter
into enough successful ventures to offset the losses on the unsuccessful
ventures. See "Description of Business - Business Plan."
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NEED FOR ADDITIONAL FINANCING. The Company's business plan requires it
to expand its business operations continuously to exploit new E-commerce
opportunities before competitors can do so, which will require significant
financing. To carry out the Company's business plan, it will require
approximately $5,000,000, including $2,000,000 for the Indexus project alone,
over the next twelve months, which will have to come from outside sources. There
can be no assurance that the Company will be able to obtain such outside
financing on terms acceptable to the Company, or at all. Failure to obtain such
financing could have a material adverse effect on the Company's operations. See
"Description of Business - Capital Requirements" and "Management's Discussion
and Analysis or Plan of Operation."
UNAUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997.
The Company's financial statements for the fiscal year ended December 31, 1997,
have not been audited or reviewed by the Company's auditors, and have been
provided in this Registration Statement for informational purposes only. These
statements are subject to adjustment in the event of an audit of such statements
prepared in accordance with generally accepted accounting principles. No
assurance can be given that such statements for the year ended December 31,
1997, adequately and properly reflect the Company's financial position for such
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations ."
COMPETITION. The Company faces competition from a wide variety of
businesses engaged in E-commerce ventures. Some of the companies with which the
Company competes are substantially larger, have more substantial histories,
backgrounds, experience and records of successful operations, greater financial,
technical, marketing and other resources, more employees and more extensive
facilities than the Company has or will have in the foreseeable future. Many of
the Company's competitors have access to significantly greater capital and
management resources than the Company. In addition, the advantages of
E-commerce, from the Company's point of view, also present serious competitive
challenges. Competitors can arise in any part of the world and may be able to
take advantage of lower costs and fees to operate their businesses. There can be
no assurance that the Company will be competitive with larger or more efficient
E-commerce service companies in the future. See "Description of
Business--Competition."
DIFFICULTY OF MAINTAINING TECHNOLOGICAL POSITION. The Company's
performance depends on its ability to develop, license or acquire new
technologies to enhance its existing services in a time effective manner. The
Company may not be able to maintain its competitive technological position
against current and potential competitors, especially those with greater
financial resources. The Company relies on its application of software
technology to give it a competitive advantage. Such software is not currently
protected by patents or copyrights. The Company's main technological advantage
over potential competitors is its software lead-time in the market and the
Company's experience in operating a wagering business. Therefore, if competitors
introduce new products and services which are based on the Company's application
of software, the Company may have little recourse and its business could be
adversely affected. See "Description of Business - Intellectual Property" and
"Description of Business -Competition."
RELIANCE ON CONSULTANTS FOR MARKETING THE COMPANY'S SERVICES. The
Company's success in marketing its services and in the recent growth in its
revenue has been dependent in significant part on the efforts of outside
consultants, and management intends to rely on such consultants in the future.
None of these consultants has a long-term agreement with the Company, and no
assurance can be given that such consultants will be able to generate new
business for the Company. See "Description of Business - Sales and Marketing."
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RISKS OF CASINO GAMING - GOVERNMENT REGULATION. Even though Go Cash's
service business does not operate in the United States, various federal and
state statutes and regulations could have a direct and material adverse effect
on the Company's business and indirectly could have a material adverse effect on
the public's demand for the Company's services. Gaming activities are subject to
extensive statutory and regulatory regulation by both state and federal
authorities, and are likely to be significantly affected by any changes in the
political climate and changes in economic and regulatory policies. One example
is a claim by a credit card holder of nonresponsibility for credit card
obligations under a theory that such obligations are gambling debts and the
cardholder is resident in a jurisdiction where such debts may not be legally
collected. Management of the Company believes that the legal position of such a
claim is without merit. However, no assurance can be given to that effect. In
the event that such claims result in a widespread refusal of credit card issuers
to process online wagering transactions, there could be a contraction in the
market for online wagering, which could have a material adverse effect on the
Company's business. See "Description of Business - Regulation of Internet
Wagering".
YEAR 2000 RISKS. The Company believes that its software programs,
either leased or purchased from outside vendors, are Y2K compliant or will be by
December 31, 1999. The Company will continue to require its third-party software
vendors and those companies which perform critical services for the Company,
including credit card processing of wagering transactions, to provide assurances
of their Y2K compliance. Although the Company believes that its software
programs, leased or purchased from outside vendors, are either already Y2K
compliant or will be by December 31, 1999, failure to identify non Y2K compliant
software could have a material adverse effect on the Company's business, results
of operations and financial condition. In addition, no assurance can be given
that one or more of the Company's vendors or service providers will not
encounter serious Y2K problems which result in a material adverse effect on the
Company's operations. See "Description of Business - Year 2000."
NO INDEPENDENT DIRECTORS. The Board of Directors consists of two
directors, neither of whom is independent. Although all directors are required
to act in the best interests of the Company and its stockholders, directors not
employed by the Company may be able to more independently assess certain key
areas, such as compensation of management as it relates to operations and
progress of the Company, and reviewing accounting issues, including the scope
and adequacy of internal control procedures, and recommending independent
auditors to serve the Company. The Company has no compensation committee.
Independent directors also aid in avoiding conflicts of interest that exist by
virtue of affiliation with the Company. Management has undertaken to appoint
independent directors to the Board at such time as qualified candidates are
available. There can be no assurance that such candidates will be available. See
"Directors, Executive Officers, Promoters and Control Persons."
LIMITED PUBLIC MARKET FOR COMMON STOCK. There is currently a limited
public market for the Common Stock. Holders of the Company's Common Stock may,
therefore, have difficulty selling their Common Stock, should they decide to do
so. In addition, there can be no assurances that such markets will continue or
that any shares of Common Stock which may be purchased may be sold without
incurring a loss. Any such market price of the Common Stock may not necessarily
bear any relationship to the Company's book value, assets, past operating
results, financial condition or any other established criteria of value, and may
not be indicative of the market price for the Common Stock in the future.
Further, the market price for the Common Stock may be volatile depending on a
number of factors, including business performance, industry dynamics, news
announcements or changes in general economic conditions. See "Market for Common
Equity and Related Shareholder Matters."
DISCLOSURE RELATING TO LOW-PRICED STOCKS. The Company's Common Stock is
currently listed for trading in the over-the-counter market on the NASD
Electronic Bulletin Board, which is generally considered to be less efficient
than markets such as NASDAQ or other national exchanges, and which may cause
difficulty in conducting trades and difficulty in obtaining future financing.
Further, the Company's securities are subject to the "penny stock rules" adopted
pursuant to Section 15 (g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). The penny stock rules apply to non-NASDAQ companies whose
common stock trades at less than $5.00 per share or which have tangible net
worth of less than $5,000,000 ($2,000,000 if the company has been operating for
three or more years). Such rules require, among other things, that brokers who
trade "penny stock" to persons other than "established customers" complete
certain documentation, make suitability inquiries of investors and provide
investors with certain information concerning trading in the security, including
a risk disclosure document and quote information under certain circumstances.
Many brokers have decided not to trade "penny stock" because of the requirements
of the penny stock rules and, as a result, the number of broker-dealers willing
to act as market makers in such securities is limited. In the event that the
Company remains subject to the "penny stock rules" for any significant period,
there may develop an adverse impact on the market, if any, for the Company's
securities. See "Market for Common Equity and Related Shareholder Matters."
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POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS. The
Company's Certificate of Incorporation includes certain provisions which are
intended to protect the Company's stockholders by rendering it more difficult
for a person or persons to obtain control of the Company without cooperation of
the Company's management. These provisions include certain super-majority
requirements for the amendment of the Company's Certificate of Incorporation and
Bylaws. Such provisions are often referred to as "anti-takeover" provisions. The
inclusion of such "anti-takeover" provisions in the Certificate of Incorporation
may delay, deter or prevent a takeover of the Company which the stockholders may
consider to be in their best interests, thereby possibly depriving holders of
the Company's securities of certain opportunities to sell or otherwise dispose
of their securities at above-market prices, or limit the ability of stockholders
to remove incumbent directors as readily as the stockholders may consider to be
in their best interests. See "Market for Common Equity and Related Shareholder
Matters."
FUTURE ISSUANCES OF PREFERRED STOCK. The Company's Certificate of
Incorporation, as amended, authorizes the issuance of preferred stock with such
designation, rights and preferences as may be determined from time to time by
the Board of Directors, without stockholder approval. In the event of the
issuance of additional series of preferred stock, the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. See "Market for Common Equity and
Related Shareholder Matters."
LACK OF DIVIDENDS ON COMMON STOCK. As of the date of this Registration
Statement, the Company has paid no dividends on its Common Stock to date and
there are no plans for paying dividends on the Common Stock in the foreseeable
future. The Company intends to retain earnings, if any, to provide funds for the
expansion of the Company's business. See "Market for Common Equity and Related
Shareholder Matters."
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Registration Statement, including the disclosures below, contains
certain forward-looking statements that involve substantial risks and
uncertainties. When used herein, the terms "anticipates," "expects,"
"estimates," "believes" and similar expressions, as they relate to the Company
or its management, are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements may differ materially from
those expressed or implied by such forward-looking statements. Factors that
could cause or contribute to such material differences include the factors
disclosed in the "Risk Factors" section of this Registration Statement, which
readers of this Registration Statement should consider carefully.
OVERVIEW OF PRESENTATION. The Company entered into an Agreement with Go
Phone Inc., an Ontario (Canada) corporation ("Go Phone"), dated as of February
23, 1998 (the "Reorganization Agreement"), pursuant to which the Company issued
5,906,175 shares of Common Stock to the former stockholders of Go Phone in
exchange for 100% of the issued and outstanding capital stock of Go Phone. In
connection with the Reorganization Agreement, Go Phone merged into a
wholly-owned subsidiary of the Company, known as Omni Advantage Canada Limited,
an Ontario (Canada) corporation, which subsequently changed its name to Go Call
Canada, Inc. ("Go Call Canada").
Go Call Canada, Inc., an Ontario corporation ("Go Call Canada"), is a
wholly-owned subsidiary of the Company which is principally a provider of
services to businesses engaged in electronic commerce ("E-commerce") on the
Internet, including services to online casinos. Such services include research
and development of E-commerce technology, management, marketing and long-range
planning.
Go Cash, Inc., a Turks and Caicos corporation ("Go Cash"), is a
wholly-owned subsidiary of the Company which performs all of the functions of
the Company's business of providing turnkey management services to electronic
casinos. These services are performed outside the United States. Go Cash's
services include ongoing marketing of the casino's business and performing
calculations, preparing the website graphical interface with the customer,
managing secure electronic transfer of funds, storage of data on individual
players, administration of customer support service, continuous update of
website and addition of new games. Certain specific services, such as processing
of credit card transactions, are outsourced to unrelated third parties.
Country Star Restaurants, Inc., a Delaware corporation ("Country Star")
operates a country music theme restaurant in Southern California. Pursuant to a
Stock Acquisition Agreement dated as of March 11, 1999, the Company acquired
approximately 92% of the issued and outstanding common stock of Country Star
from the three principal shareholders of Country Star in exchange for 4,552,751
shares of the Company's Common Stock, which represented twenty-three percent
(23%) of all of the Company's issued and outstanding Common Stock. After the
Company assumed control of Country Star's operations, the Company advanced
approximately $250,000 to Country Star in exchange for a promissory note secured
by all of Country Star's assets. Management of the Company subsequently
determined that the Company had not received complete disclosure of Country
Star's operations and, pursuant to a Repurchase Agreement, dated as of August 5,
1999, redeemed the 4,552,751 shares of its Common Stock for a cash payment of
$728,440.
On February 1, 1998, the Company's stockholders approved a reverse
split of the issued and outstanding shares of Common Stock, in connection with
the transactions contemplated by the Reorganization Agreement with Go Phone,
which resulted in the decrease of the issued and outstanding shares from
11,812,350 to 5,906,175 shares, as of such date.
The consolidated financial statements of the Company, included
elsewhere in this Registration Statement, have been presented, for accounting
purposes, as a recapitalization of Co Call Canada, with Go Call Canada as the
acquiror. Further, the consolidated financial statements reflect the operations
of Go Cash, commencing from its inception on July 1, 1999. For purposes of
clarity in this section, the term "Company" reflects the financial condition and
results of operations of Go Call Canada and the combined operations of the
parent holding company, Go Call Inc., a Delaware corporation, and Go Call Canada
following the completion of the Reorganization Agreement, and of Go Cash
following July 1, 1999. See "Liquidity and Capital Resources."
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The Company's consolidated financial statements included in this
Registration Statement do not reflect the assets and liabilities or results of
operations of Country Star, following the Company's acquisition of a controlling
interest in Country Star on March 11, 1999. The Company does not currently have
available adequate information gathering and reporting systems to provide
reasonably reliable financial information on Country Star for purposes of
presentation in the Company's financial statements. Rather, the Company has
presented on its consolidated balance sheets the amount of $728,440 for the
aggregate purchase price for the Company's 92% equity interest in Country Star.
There can be no assurances that the value of the equity interest in Country
Star, set forth in the Company's consolidated balance sheets, included elsewhere
in this Registration Statement, will not be written down in whole or in part, in
the future or upon audit.
The Company intends to consolidate the assets and liabilities and
results of operations of Country Star in the Company's consolidated financial
statements in the future, assuming the availability of reasonably reliable
financial information on Country Star in the future. However, there can be no
assurances to this effect. The Company is also attempting to dispose of its
interest in Country Star. However, there can be no assurances that the Company
will be able to dispose of its interest in Country Star on favorable terms or at
all. The failure of the Company to be able to consolidate financial information
relating to Country Star in the Company's consolidated financial statements may
have a material adverse effect on the Company's ability to conduct financings in
the future.
Further, the consolidated financial statements of the Company included
in this Registration Statement, for the year ended December 31, 1997, have not
been audited or reviewed by the Company's auditors, and have been provided in
such financial statements by management of the Company for informational
purposes only, and may be subject to adjustment upon an audit prepared in
accordance with generally accepted accounting principles. See "Risk Factors -
Unaudited Financial Information for the Year Ended December 31, 1997."
RESULTS OF OPERATIONS FOR THE NINE (9) MONTHS ENDED SEPTEMBER 30, 1999
AND 1998. Total revenues for the nine (9) months ended September 30, 1999
increased 97% to $1,012,278 from $513,911 for the nine (9) months ended
September 30, 1998. Total revenues principally include: (i) revenues generated
from wagers processed, net of payouts, from the Company's E-commerce casino
gaming processing business operations, and (ii) revenues related to the
Company's telecommunications products and services.
E-commerce gaming processing revenues during the nine (9) months ended
September 30, 1999 increased to $967,299 from none during the nine (9) months
ended September 30, 1998. This increase primarily related to the commencement of
the Company's E-commerce gaming processing business operations in September,
1998.
Revenues relating to the Company's telecommunications products and
services during the nine (9) months ended September 30, 1999 decreased 91% to
$44,979 from $513,911 during the nine (9) months ended September 30, 1998. This
decrease primarily related to the sale of the Company's phone card business in
October, 1998.
Total operating expenses during the nine (9) months ended September 30,
1999 increased 43% to $1,427,317 from $996,062 during the nine (9) months ended
September 30, 1998. Total operating expenses principally include: (i) direct
expenses, (ii) interest expense, (iii) general and administrative expenses, and
(iv) amortization expenses, as follows:
Direct expenses during the nine (9) months ended September 30, 1999
increased 97% to $571,061 from $290,637 during the nine (9) months ended
September 30, 1998. This increase primarily resulted from the payment of
$336,237 in licensing fees during 1999 related to the Company's E-commerce
gaming processing business.
Interest expenses during the year ended September 30, 1999 decreased
67% to $2,448 from $7,333 during the nine (9) months ended September 30, 1998.
This decrease primarily related to accrued interest on advances from
stockholders, including from Irving Moon, a director of the Company. See
"Liquidity and Capital Resources."
General and administrative expenses during the nine (9) months ended
September 30, 1999 increased 20% to $783,025 from $651,553 during the nine (9)
months ended September 30, 1998. This increase related to increases in
professional and consulting fees, offset by decreases in advertising costs in
connection with the sale of the Company's phone card business in October, 1998.
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In addition, amortization expenses during the nine (9) months ended
September 30, 1999 increased 52% to $70,783 from $46,539 during the nine (9)
months ended September 30, 1998. The increase related to the amortization of
certain computer software acquired by the company in November, 1998.
As a result of the foregoing, the Company generated a net loss and a
loss from operations of $415,039 during the nine (9) months ended September 30,
1999, as compared to a net loss and a loss from operations of $482,151 during
nine (9) months ended September 30, 1998 See "Liquidity and Capital Resources."
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997.
Total revenues for the year ended December 31, 1998 increased approximately 136%
to $914,805 from $387,318 for the year ended December 31, 1997. Total revenues
principally include: (i) revenues generated from wagers processed, net of
payouts, from the Company's E-commerce casino gaming processing business
operations, and (ii) revenues related to the Company's telecommunications
products and services.
E-commerce gaming processing revenues during the year ended December
31, 1998 increased to $81,677 from none during the year ended December 31, 1997.
This increase primarily related to the commencement of the Company's E-commerce
gaming processing business in September, 1998.
Revenues related to the Company's telecommunications products and
services during the year ended December 31, 1998 increased 115% to $833,128 from
$387,318 during the year ended December 31, 1997. This increase primarily
related to increased revenues from the Company's phone card business prior to
the sale of that business segment by the Company in October, 1998.
Total operating expenses during the year ended December 31, 1998
increased 102% to $1,774,269 from $878,577 during the year ended December 31,
1997. Total operating expenses principally include: (i) direct expenses, (ii)
interest expense, (iii) general and administrative expenses, and (iv)
amortization expenses, as follows:
Direct expenses during the year ended December 31, 1998 increased 72%
to $578,489 from $336,492 during the year ended December 31, 1997. This increase
primarily resulted from increased costs for the purchase of phone cards in
connection with the growth of the Company's phone card sales prior to October,
1998.
Interest expenses during the year ended December 31, 1998 increased
126% to $11,174 from $4,939 during the year ended December 31, 1997. This
increase primarily related to accrued interest on advances from Irving Moon. See
"Liquidity and Capital Resources."
General and administrative expenses during the year ended December 31,
1998 increased 138% to $1,103,817 from $463,037 during the year ended December
31, 1997. This increase related to increases in costs of advertising, internal
software development, travel and vehicle expenses, commissions and wages, dues
and license fees, and professional and consulting fees.
In addition, amortization expenses during the year ended December 31,
1998 increased 9% to $80,789 from $74,109 during the year ended December 31,
1997. The increase related to the amortization of certain computer software
acquired by the company in November, 1998.
Further, during the year ended December 31, 1997, the Company incurred
an expense of the write down to net realizable value of a hotel and resort
property located in the Dominican Republic, which the Company had purchased in
November, 1997 for 3,360,000 shares of Common Stock, at an agreed upon value of
$2,500,000. In connection with an appraisal of the fair value of the hotel and
resort property, dated as of February 8, 1998, the net realizable value of the
property was written down on the Company's consolidated balance sheets by the
amount of $500,000. This write down expense did not recur during the year ended
December 31, 1998.
As a result of the foregoing, the Company generated a net loss of
$859,464 during the year ended December 31, 1998, as compared to a net loss of
$991,259 during the year ended December 31, 1997. The Company generated a loss
from operations of $859,464 during the year ended December 31, 1998, as compared
to a loss from operations of $491,259 during the year ended December 31, 1997.
See "Liquidity and Capital Resources."
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LIQUIDITY AND CAPITAL RESOURCES. At December 31, 1998, the ratio of
current assets to current liabilities was 1.125 to 1 as compared to 0.21 to 1 at
December 31, 1997. At September 30, 1999, the ratio of current assets to current
liabilities was 2.33 to 1.
The Company's cash flow needs for the years ended December 31, 1998 and
1997, and the nine (9) months ended September 30, 1999, were primarily provided
from operations, stockholder loans and financings related to sales of the
Company's securities.
In 1998, the Company received gross proceeds of $564,319 from the sale
of an aggregate of 4,260,500 shares of Common Stock. During the nine (9) months
ended September 30, 1999, the Company received gross proceeds of $1,834,273 from
the sale of an aggregate of 4,139,102 shares of Common Stock.
Cash and cash equivalents were $42,962, as of December 31, 1998, as
compared to $5,913 as of December 31, 1997. This increase was primarily
attributable to the sale of $614,319 of the Company's securities and the receipt
of stockholder loans in the aggregate amount of $142,838 and the issuance of
$250,000 of convertible debt securities during the year ended December 31, 1998.
Cash and cash equivalents were $124,807, as of September 30, 1999. The increase
from December 31, 1998 was primarily attributable to the sale of $1,834,273 of
the Company's securities and the receipt of stockholder loans in the aggregate
amount of $720,112 during the year ended December 31, 1997.
As of September 30, 1999, December 31, 1998 and December 31, 1997, the
Company did not have any long-term borrowings.
As of December 31, 1998, the Company had short-term borrowings in the
aggregate amount of $419,550, as compared to $233,063 at December 31, 1997,
consisting principally of payables to vendors and obligations to stockholders.
The increase/decrease in short-term borrowings primarily was attributable to
additional advances received from stockholders. As of September 30, 1999, the
Company had short-term borrowings in the aggregate amount of $1,230,170,
consisting principally of payables to vendors and obligations to stockholders.
The increase/decrease in short-term borrowings from December 31, 1998 was
primarily attributable to additional advances received from stockholders.
At September 30, 1999, the Company had loans payable to Donald Fultz, a
principal stockholder of the Company, in the amount of $386,917, and to an
affiliate of Michael Ruge, the Company's President, Chairman of the Board of
Directors and a principal stockholder, in the amount of $289,516. The loans
payable to Mr. Fultz and to Mr. Ruge's affiliate are non-interest bearing loans.
As of September 30, 1999, the Company was owed $2,784 by Michael Ruge, as a loan
receivable, and $271,230 by Irving Moon, as a subscription receivable relating
to the purchase of 251,154 shares of Common Stock on behalf of other
stockholders of the Company in June and August, 1999, and the amount of $3,401,
as a loan receivable. The Company's financial statements reflect that the
Company was owed $235,355 by Country Star.
Net cash used in operating activities was $807,177 and $193,886 for the
years ended December 31, 1998 and 1997, respectively. Net cash used in
operations during the year ended December 31, 1998 primarily consisted of net
loss from operations and increases in accounts receivable, prepaid expenses and
inventory, offset by amortization, services paid by the issuance of Common Stock
and increases in accounts payable and accrued charges. Net cash used in
operating activities during the year ended December 31, 1997 primarily consisted
of net losses from operations, offset by amortization, the write down to net
realizable value of a hotel, decreases in accounts receivable, inventory,
prepaid expenses and increases in accounts payable and accrued charges.
Net cash used in operating activities was $1,118,408 and $467,735 for
the nine (9) months ended September 30, 1999 and 1998, respectively. Net cash
used in operating activities during the nine (9) months ended September 30, 1999
and 1998 primarily consisted of net loss from operations and increases in
accounts receivable, deposits (1998 only) and prepaid expenses, offset by
amortization, decreases in inventory and increases in accounts payable and
accrued charges.
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Net cash used in investing activities was $104,022 and $98,655 for the
years ended December 31, 1998 and 1997, respectively. In the year ended December
31, 1998, the Company utilized $97,355 to purchase certain capital assets,
including computer equipment, furniture and restaurant equipment for the hotel,
and to make renovations to the hotel property, and utilized $6,667 to purchase
certain intangible assets, including software and distribution rights. In the
year ended December 31, 1997, the Company utilized $98,655 to purchase certain
capital assets, including computer equipment, automobiles, restaurant equipment,
and to make renovations to the hotel and other leasehold improvements.
Net cash used in investing activities was $263,613 and $6,010 for the
nine (9) months ended September 30, 1999 and 1998, respectively. In the nine (9)
months ended September 30, 1999, the Company utilized $263,613 to purchase
certain capital assets, including computer hardware and software. In the nine
(9) months ended September 30, 1998, the Company utilized $6,010 to purchase
certain capital assets, including computer hardware and software.
Net cash provided by financing activities was $1,049,157 and $340,391
for the years ended December 31, 1998 and 1997, respectively. In the year ended
December 31, 1998, the Company received proceeds of $614,319 from the issuance
of Common Stock, $250,000 from the issuance of convertible debt securities,
$142,838 from the proceeds of loans from stockholders of the Company, including
$88,000 from Michael Ruge, and $58,000 from Donald Fultz, and was owed $42,000
related to a Common Stock subscription receivable. In the year ended December
31, 1997, the Company received proceeds of $242,488 from the issuance of Common
Stock and $97,903 from the proceeds of loans from stockholders of the Company,
including $71,000 from Irving Moon, bearing interest at the rate of 12% PER
ANNUM, and $26,000 from Michael Ruge.
Net cash provided by financing activities was $1,825,945 and $398,882
for the nine (9) months ended September 30, 1999 and 1998, respectively. In the
nine (9) months ended September 30, 1999, the Company received proceeds of
$1,834,273 from the issuance of Common Stock and $720,112 from the proceeds of
loans from stockholders of the Company, including net loans of $190,000 from an
affiliate of Michael Ruge, and $330,000 from Donald Fultz and $200,000 from
Connoisseur Club, Inc., a principal stockholder of the Company, which was offset
by the payment of $728,440 related to the redemption 4,552,751 shares of common
stock of Country Star. The Company retains a 92% ownership interest in Country
Star. In the nine (9) months ended September 30, 1998, the Company received
proceeds of $389,069 from the issuance of Common Stock and $9,813 from the
proceeds of a loan from Michael Ruge.
The Company has historically financed its operations through working
capital provided by operations, loans and the private placement of equity and
debt securities. The Company's business plan contemplates continued expansion of
operations. The Company's ability to maintain and expand operations is currently
dependent on financing from external sources. There can be no assurances that
additional capital will be available on terms favorable to the Company or at
all, that the Company will be able to generate business sources to generate
sufficient positive cash flow in order to maintain operations or to continue the
Company's business plan of growth and expansion. To the extent that additional
capital is raised through the sale of additional equity or debt securities , the
issuance of such securities could result in additional dilution to the Company's
stockholders. Moreover, the Company's cash requirements may vary materially from
those now planned because changes in the Company's business plan or the level of
working capital required to sustain the Company's planned growth, litigation,
operating results, including the extent and duration of operating losses, and
other factors. In the event that the Company experiences the need for additional
capital, and is not able to generate capital from financing sources or from
future operations, management may be required to modify, suspend or discontinue
the operations and business plan of the Company.
FOREIGN CURRENCY TRANSLATION. Foreign currency assets and liabilities
of the Company have been translated in the Company's financial statements from
Canadian dollar values into United States dollar values, at the rate of exchange
prevailing at the balance sheet date. Foreign currency revenues and expenses are
translated at average exchange rates for the period reported.
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The Company financial statements include an explanatory footnote which
states to the effect that the Company has determined that its Canadian
operations are self-sustaining and, accordingly, the local Canadian currency is
the functional currency for reporting in the Company's financial statements. The
resulting net foreign exchange adjustments on the translation of the Company's
financial statements from Canadian to United States currency has been deferred,
and included as a separate component of stockholders' equity.
The statement of cash flows in the Company's financial statements
reflect an effect of exchange rate changes on cash in the following amounts for
the following periods: (i) ($100,909) and ($51,398) during the years ended
December 31, 1999 and 1998, respectively, and (ii) ($362,079) and $132,156
during the nine (9) month periods ended September 30, 1999 and 1998,
respectively.
YEAR 2000 DILEMMA AND COMPLIANCE. Based on an internal assessment, the
Company believes that its software programs, either leased or purchased from
outside vendors, are Y2K compliant or will be by December 31, 1999. The Company
began assessing its state of Y2K readiness during late 1998. This included
reviewing the Y2K compliance of third-party software vendors and of those
companies which perform critical services for the Company, including credit card
processing of wagering transactions. The Company will continue to require its
service providers and vendors of software to provide assurances of their Y2K
compliance.
As of the date of this Registration Statement, the Company has incurred
minimal costs in identifying and evaluating Y2K compliance issues. Most of the
Company's expenses have related to, and are expected to continue to relate to,
the operating costs associated with time spent by employees in the evaluation of
Y2K compliance matters. At this time, the Company does not possess the
information necessary to estimate the potential costs of future revisions to its
software packages should revisions be required or the replacement of third-party
software, if any, that are determined to not be Y2K compliant. Although the
Company believes that its software programs, leased or purchased from outside
vendors are either already Y2K compliant or will be by December 31, 1999,
failure to identify non Y2K compliant software could have a material and adverse
effect on the Company's business, results of operations and financial condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS. The Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosure About Segments of an Enterprise and Related
Information" during 1998, which requires disclosures about products and
services, geographic areas and major customers. The adoption of SFAS 131 did not
affect results of operations or the financial position of the Company. The
Company has provided comparable information for prior periods.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. SFAS 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging securities. Currently,
as the company has no derivative instruments, the adoption of SFAS 133 will not
have an impact on the company's financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The Company
is not currently exposed to market risks due to changes in interest rates and
foreign currency rates, and therefore, the Company does not use derivative
financial instruments to address risk management issues in connection with
changes in interest rates and foreign currency rates.
ITEM 3. DESCRIPTION OF PROPERTY
The Company is in the process of moving its principal administrative,
data and marketing facilities to offices in the greater Montreal, Quebec area,
in a space totaling approximately 950 square feet., for which the Company is
paying rent of total approximately US$900 on a month-to-month basis. The
Company's lease in Cambridge has been assumed by a new tenant, an unrelated
third party, which assumption has been consented to by the landlord. The Company
has been released by the landlord from any further obligations under such lease.
The Company also maintains property in Kitchener, Ontario for the Internet cafe
of approximately 2,000 square feet, for which the Company pays a monthly rental
of US$1,500 on a lease which will expire in September, 2001. The Company owns
and operates a resort hotel in the Dominican Republic which is debt-free.
19
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of November 16, 1999, the Company had issued and outstanding
19,825,410 shares of Common Stock. The following table reflects, as of November
16, 1999, the beneficial Common Stock ownership of: (a) each director of the
Company, (b) each executive officer named in the Summary Compensation Table, (c)
person known by the Company to be a beneficial owner of five percent (5%) or
more of its Common Stock and (d) all executive officers and directors of the
Company as a group:
Name and Address of Number
Beneficial Owner of Shares Percent
- ---------------- --------- -------
Michael Ruge, CEO and Director (1) (2) 2,786,951 14.06
Irving Insik Moon, Director (2) 100,000 0.50
Donald Fultz (3) 1,329,635 6.71
Connoisseur Club Inc. (4) 1,965,000 9.91
All Directors and Officers as a Group (2 persons) 2,886,951 14.56
- ---------------------
# Pursuant to the rules of the Commission, shares of Common Stock which
an individual or group has a right to acquire within 60 days pursuant to the
exercise of options or warrants are deemed to be outstanding for the purpose of
computing the percentage ownership of such individual or group, but are not
deemed to be outstanding for the purpose of computing the percentage ownership
of any other person shown in the table.
1. Includes 960,000 shares owned directly, 207,916 shares owned
by his wife Elspeth Ruge, and 1,619,035 shares owned by the
Ruge Family Trust.
2. The address for Messrs Ruge and Moon is Plaza 138, Unit 5,
Route 138, KM 30, Kahnawake, Quebec, Canada, J0L1B0
3. The address for Mr. Fultz is 5770 Spring Garden, Halifax, Nova
Scotia, Canada.
4. The address for Connoisseur Club Inc. is 2 Caribbean Place,
Providenciales, Turks & Caicos.
20
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors of the Company currently have terms which will end at the
next annual meeting of the stockholders of the Company or until their successors
are elected and qualify, subject to their prior death, resignation or removal.
Officers serve at the discretion of the Board of Directors. There are no family
relationships among any of the Company's directors and executive officers.
The following reflects certain biographical information on the current
directors and executive officers of the Company:
NAME POSITION AGE
- ---- -------- ---
Michael Ruge Director and Chief Executive Officer 37
Irving Insik Moon Director 61
Michael Ruge, Chief Executive Officer and a director of the Company,
was the President of Go Phone, Inc., a telecommunications company, from June,
1995 until its merger into the Company in February, 1998. From 1991 to May,
1994, Mr. Ruge managed the Hotel Jardin del Sol in Sosua, Dominican Republic.
Mr. Ruge founded Premium Spring Water and Juice Company, Inc. in 1987 and took
that company public in 1990.
Irving Insik Moon, a director of the Company, has been, since August,
1982, the General Manager of I. Moon Associates Ltd., an international business
consulting firm located in Ontario, Canada. Mr. Moon was awarded a B.A. in
mechanical engineering from Hanyang University in Seoul, Korea.
LIMITATIONS ON DIRECTOR LIABILITY. The Company's Certificate of
Incorporation provides, as permitted by governing Delaware law, that a director
of the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, with certain
exceptions. These provisions may discourage stockholders from bringing suit
against a director for breach of fiduciary duty and may reduce the likelihood of
derivative litigation brought by stockholders on behalf of the Company against a
director. See "Indemnification of Officers and Directors."
ITEM 6. EXECUTIVE COMPENSATION
No executive officer of the Company received total compensation of at
least $100,000, for the fiscal year ended December 31, 1998.
COMPENSATION OF DIRECTORS.
The Company pays no compensation to its directors for services as
directors.
DIRECTORS AND OFFICERS LIABILITY INSURANCE.
The Company does not have directors' and officers' liability insurance.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS.
The Company has no compensatory plans or an arrangements which relate
to the resignation, retirement or any other termination of an executive officer
or key employee of the Company.
21
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 11, 1997, the Company borrowed $70,092 at 12% interest PER
ANNUM, from Irving Moon, a director of the Company. As of the date of this
Registration Statement, all of the principal and accumulated interest have been
repaid.
Michael Ruge, an officer, director and principal shareholder of the
Company, made interest-free advances totaling $15,862 during fiscal 1997, which
amount increased to $104,141 during fiscal 1998. As of the date of this
Registration Statement, all of such advances have been repaid.
During fiscal 1998, Donald Fultz, who is a shareholder and employee of
the Company, advanced a total of $57,983, interest-free, all of which remains
outstanding as of the date of this Registration Statement.
During fiscal 1999, Donald Fultz and Michael Ruge advanced a total of
$670,247, interest-free, all of which remains outstanding as of the date of this
Registration Statement.
During the ten-month period ended on September 30, 1999, from
Connoisseur Club, Inc., a principal stockholder of the Company, made an
interest-free loan of $200,000 to the Company.
In March, 1998, the Company issued 300,000 shares of Common Stock to
Susan Knight, a consultant of the Company, at a price per share ranging from
$0.50 to $2.50.
In May, 1999, the Company issued 7,137 shares of Common Stock to Eldon
Richardson, an employee of the Company, at a price per share of $1.50, in
respect of services rendered to the Company.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Michael Ruge, at a price per share of $0.32, in respect of services rendered to
the Company.
On August 30, 1999, the Company issued 150,000 options to Michael
Avatar, a consultant to the Company, in respect of services rendered to the
Company. On August 30, 1999, the Company's Common Stock traded at $1.3125.
On October 4, 1999, the Company issued 500,000 shares of Common Stock
to Michael Avatar, at a price per share of $0.32, in respect of services
rendered to the Company. On that date, the Company's Common Stock traded at
$1.0312.
It is the practice of management that transactions between the Company
and its officers, directors, employees or stockholders or persons or entities
affiliated with officers, directors, employees or stockholders be on terms no
less favorable to the Company than it could reasonably obtain in arm's-length
transactions with independent third parties. No assurance can be given that all
such agreements will be on such terms.
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<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of $0.001 par
value Common Stock. Subject to those preferential rights, as may be determined
by the Board of Directors of the Company in the future in connection with the
issuance of a series of Preferred Stock, holders of Common Stock are entitled to
cast one vote for each share held of record, to receive such dividends as may be
declared by the Board of Directors out of legally available funds and to share
ratably in any distribution of the Company's assets after payment of all debts
and other liabilities, upon liquidation, dissolution or winding up. Stockholders
do not have preemptive rights or other rights to subscribe for additional
shares, and the Common Stock is not subject to redemption. The outstanding
shares are validly issued, fully paid and nonassessable.
Under Delaware law, each holder of a share of Common Stock is entitled
to one vote per share for each matter submitted to the vote of the stockholders,
and cumulative voting is allowed for the election of directors, if provided for
in the Certificate of Incorporation. The Company's Certificate of Incorporation
does not provide for cumulative voting.
PREFERRED STOCK
The Company's Certificate of Incorporation authorizes the issuance of
up to 2,000,000 shares of $0.001 par value Preferred Stock. There are no shares
of Preferred Stock issued. The Company's Board of Directors has the power,
without further action by the holders of Common Stock, to designate the relative
rights and preferences of the preferred stock, and to issue the preferred stock
in such one or more series as designated by the Board of Directors. The
designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or other
preferences, any of which may be dilutive of the interest of the holders of the
common stock or the preferred stock of any other series. The issuance of
preferred stock may have the effect of delaying or preventing a change in
control of the Company without further shareholder action and may adversely
affect the rights and powers, including voting rights, of the holders of common
stock. In certain circumstances, the issuance of preferred stock could depress
the market price of the common stock. The Board of Directors effects a
designation of each series of preferred stock by filing with the Delaware
Secretary of State a certificate of designation defining the rights and
preferences of each such series.
WARRANTS
The Company has issued no warrants for the purchase of shares of its
Common Stock.
OPTIONS
During fiscal 1998, options to acquire 1,902,000 shares of Common Stock
were granted by the Company, including options for 800,000 shares at exercise
prices from $1.00 to $5.00 per share to consultants and suppliers of the
Company. In August, 1999, the Company issued 360,000 options to consultants of
the Company at exercise prices ranging from $1.00 to $1.50 per share. As of the
date of this Registration Statement, none of these options has been exercised.
CERTAIN ANTI-TAKEOVER PROVISIONS
SUPERMAJORITY REQUIRED FOR AMENDMENT. In order to insure that the
substantive provisions set forth in the Certificate of Incorporation are not
circumvented by the amendment of such Certificate of Incorporation pursuant to a
vote of a majority of the voting power of the Company's outstanding shares, the
Certificate of Incorporation also provides that any amendment, change or repeal
of the provisions contained in the Certificate of Incorporation with respect to:
(i) the Company's capitalization, (ii) amendment of the Bylaws, (iii)
determination by the Board of the number of directors, (iv) filling Board
vacancies, (v) the requirement that stockholder action be taken at an annual or
special meeting, (vi) requirements with respect to appraisal rights for
stockholders, or (vii) the amendment of the provision imposing such
supermajority requirement for amendment of the Certificate of Incorporation,
23
<PAGE>
shall require the affirmative vote of the holders of at least 66 2/3% of the
voting power of all outstanding shares of voting stock, including, in any
instance where the repeal or amendment is proposed by an interested stockholder
(as such term is defined in Section 203 of the Delaware General Corporation Law)
or its affiliate or associate, the affirmative vote of a majority of the voting
power of all outstanding shares of voting stock held by persons other than such
interested stockholder or its affiliates or associates. However, only the
affirmative vote of the majority of the voting power of all outstanding shares
of voting stock is required if the amendment of any of the foregoing provisions
is approved by a majority of the Continuing Directors (as such term is defined
in the Certificate of Incorporation).
The Certificate of Incorporation permits the Board of Directors to
adopt, amend or repeal any or all of the Company's bylaws without stockholder
action and provide that such bylaws may also be adopted, amended or repealed by
its stockholders, but only if approved by holders of 66 2/3% or more of the
voting power of all outstanding shares of voting stock, including in any
instance in which the alteration is proposed by an interested stockholder or by
affiliates or associate of any interested stockholder, the affirmative vote of
the holders of at least a majority of voting power of all outstanding shares of
voting stock held by persons other than the interested stockholder who proposed
such action. However, the only stockholder vote required if the modification is
approved by a majority of the continuing directors is the affirmative vote of
the majority of the voting power of all outstanding shares of voting stock.
1999 STOCK OPTION PLAN
As of April 12, 1999, the Company's Board of Directors approved a 1999
Stock Option Plan (the "Stock Option Plan"), and was approved by the
shareholders on August 31, 1999. The Company has reserved for issuance
thereunder an aggregate of 1,500,000 shares of Common Stock. The Stock Option
Plan provides for the grant to employees of the Company of incentive stock
options within the meaning of Section 422 of the Code, and for the grant to
employees and consultants of nonstatutory stock options. The description of the
1999 Stock Option Plan is intended to be a summary of the material provisions of
the Stock Option Plan and does not purport to be complete.
GENERAL. The general purposes of the Stock Option Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees and consultants of
the Company and to promote the success of the Company's business. It is intended
that these purposes will be effected through the granting of stock options,
which may be either "incentive stock options" as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonstatutory stock
options.
The Stock Option Plan provides that options may be granted to the
employees (including officers and directors who are employees) and consultants
of the Company, or of any parent or subsidiary of the Company. Incentive stock
options may be granted only to employees. An employee or consultant who has been
granted an option may, if otherwise eligible, be granted additional options. The
Company has not granted any options to purchase shares of Common Stock under the
Stock Option Plan.
Administration of and Eligibility Under Stock Option Plan. The Stock
Option Plan, as adopted, provides for the issuance of options to purchase shares
of Common Stock to officers, directors, employees, independent contractors and
consultants of the Company and its subsidiaries as an incentive to remain in the
employ of or to provide services to the Company and its subsidiaries. The Stock
Option Plan authorizes the issuance of incentive stock options ("ISOs"),
non-qualified stock options ("NSOs") and stock appreciation rights ("SARs") to
be granted by a committee (the "Committee") to be established by the Board of
Directors to administer the Stock Option Plan, which will consist of at least
two (2) outside directors of the Company.
Subject to the terms and conditions of the Stock Option Plan, the
Committee will have the sole authority to determine: (a) the persons
("optionees") to whom options to purchase shares of Common Stock and SARs will
be granted, (b) the number of options and SARs to be granted to each such
optionee, (c) the price to be paid for each share of Common Stock upon the
exercise of each option, (d) the period within which each option and SAR will be
exercised and any extensions thereof, and (e) the terms and conditions of each
such stock option agreement and SAR agreement which may be entered into between
the Company and any such optionee.
24
<PAGE>
All officers, directors and employees of the Company and its
subsidiaries and certain consultants and other persons providing significant
services to the Company and its subsidiaries will be eligible to receive grants
of options and SARs under the Stock Option Plan. However, only employees of the
Company and its subsidiaries are eligible to be granted ISOs.
STOCK OPTION AGREEMENTS. All options granted under the Stock Option
Plan will be evidenced by an option agreement or SAR agreement between the
Company and the optionee receiving such option or SAR. Provisions of such
agreements entered into under the Stock Option Plan need not be identical and
may include any term or condition which is not inconsistent with the Stock
Option Plan and which the Committee deems appropriate for inclusion.
INCENTIVE STOCK OPTIONS. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power of all
classes of the securities of the Company or its subsidiaries to whom such
ownership is attributed on the date of grant ("Ten Percent Stockholders"), the
exercise price of each ISO must be at least one hundred percent (100%) of the
fair market value of the Company's Common Stock as determined on the date of
grant. ISOs granted to Ten Percent Stockholders must be at an exercise price of
not less than one hundred ten percent (110%) of such fair market value.
Each ISO must be exercised, if at all, within ten (10) years from the
date of grant, but, within five (5) years of the date of grant in the case of
ISO's granted to Ten Percent Stockholders. An optionee of an ISO may not
exercise an ISO granted under the Stock Option Plan so long as such person holds
a previously granted and unexercised ISO. The aggregate fair market value
(determined at time of the grant of the ISO) of the Common Stock with respect to
which the ISOs are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.
As of the date of this Registration Statement, no ISO's have been
granted under the Stock Option Plan.
NON-QUALIFIED STOCK OPTIONS. The exercise price of each NSO will be
determined by the Committee on the date of grant. The Company hereby undertakes
not to grant any non-qualified stock options under the Stock Option Plan at an
exercise price less than eighty five percent (85%) of the fair market value of
the Common Stock on the date of grant of any non-qualified stock option under
the Stock Option Plan. The exercise period for each NSO will be determined by
the Committee at the time such option is granted, but in no event will such
exercise period exceed ten (10) years from the date of grant. As of the date of
this Registration Statement no NSO's have been granted under the Stock Option
Plan.
STOCK APPRECIATION RIGHTS. Each SAR granted under the Stock Option Plan
will entitle the holder thereof, upon the exercise of the SAR, to receive from
the Company, in exchange therefor, an amount equal in value to the excess of the
fair market value of the Common Stock on the date of exercise of one share of
Common Stock over its fair market value on the date of exercise of one share of
Common Stock over its fair market value on the date of grant (or in the case of
an SAR granted in connection with an option, the excess of the fair market of
one share of Common Stock at the time of exercise over the option exercise price
per share under the option to which the SAR relates), multiplied by the number
of shares of Common Stock covered by the SAR or the option, or portion thereof,
that is surrendered.
SARs will be exercisable only at the time or times established by the
Committee. If an SAR is granted in connection with an option, the SAR will be
exercisable only to the extent and on the same conditions that the related
option could be exercised. The Committee may withdraw any SAR granted under the
Stock Option Plan at any time and may impose any conditions upon the exercise of
an SAR or adopt rules and regulations from time to time affecting the rights of
holders of SARs. As of the date of this Registration Statement, no SAR's have
been granted.
TERMINATION OF OPTION AND TRANSFERABILITY. In general, any unexpired
options and SARs granted under the Stock Option Plan will terminate: (a) in the
event of death or disability, pursuant to the terms of the option agreement or
SAR agreement, but not less than six (6) months or more than twelve (12) months
after the applicable date of such event, (b) in the event of retirement,
pursuant to the terms of the option agreement or SAR agreement, but no less that
thirty (30) days or more than three (3) months after such retirement date, or
(c) in the event of termination of such person other than for death, disability
or retirement, until thirty (30) days after the date of such termination.
However, the Committee may in its sole discretion accelerate the exercisability
of any or all options or SARs upon termination of employment or cessation of
services. The options and SARs granted under the Stock Option Plan generally
will be non-transferable, except by will or the laws of descent and
distribution.
25
<PAGE>
ADJUSTMENTS RESULTING FROM CHANGES IN CAPITALIZATION. The number of
shares of Common Stock reserved under the Stock Option Plan and the number and
price of shares of Common Stock covered by each outstanding option or SAR under
the Stock Option Plan will be proportionately adjusted by the Committee for any
increase or decrease in the number of issued and outstanding shares of Common
Stock resulting from any stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like event.
AMENDMENT OR DISCONTINUANCE OF STOCK OPTION PLAN. The Board of
Directors has the right to amend, suspend or terminate the Stock Option Plan at
any time. Unless sooner terminated by the Board of Directors, the Stock Option
Plan will terminate on the tenth anniversary date of the effectiveness of the
Stock Option Plan
26
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS.
As of November 19, 1999, the authorized capital stock of the Company
consisted of 100,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock") and 2,000,000 shares of preferred stock, par value $0.001 per
share (the "Preferred Stock"). As of November 16, 1999, there were issued and
outstanding 19,825,410 shares of Common Stock and options to purchase 2,252,000
shares of Common Stock.
The Company's Common Stock is listed for trading in the
over-the-counter market and is quoted on the NASD Bulletin Board under the
symbol "GOCA." The Company's Common Stock has a very limited trading history and
has been quoted on the Bulletin Board only since April 19, 1999. The following
table sets forth quotations for the bid and asked prices for the Common Stock
for the periods indicated below, based upon quotations between dealers, without
adjustments for stock splits, dividends, retail mark-ups, mark-downs or
commissions, and therefore, may not represent actual transactions:
<TABLE>
<CAPTION>
Closing Bid Closing Asked
----------- -------------
High Low High Low
---- --- ---- ---
Year Ended December 31, 1998
<S> <C> <C> <C> <C>
1st Quarter (1) 1.125 0.25 3.125 1
2nd Quarter 1.0625 0.21875 2 0.28125
3rd Quarter 0.50 0.14 0.5625 0.23
4th Quarter 0.9375 0.3125 1 0.46875
Year Ending December 31, 1999
1st Quarter 2.375 0.46 2.50 0.53125
2nd Quarter 2.40625 1.4375 2.5625 1.50
3rd Quarter 1.875 0.71875 2 0.8125
</TABLE>
- --------------------
1. From February 10, 1998 through March 31, 1998.
The bid and asked sales prices of the Common Stock, as traded in the
over-the-counter market, on November 15, 1999, were approximately $0.625 and
$0.75, respectively.
No dividend has been declared or paid by the Company since inception.
The Company does not anticipate that any dividends will be declared or paid in
the future.
The transfer agent for the Company is Interwest Transfer Company, 1981
East South, #100, Salt Lake City, Utah 84117, telephone 801-272-9294.
ITEM 2. LEGAL PROCEEDINGS.
Harvey Productions, Inc. vs. Michael Ruge and Go Call, Inc., Los
Angeles County Superior Court Case No. Sc 054315. A Complaint was filed against
the Company and Michael Ruge, Chief Executive Officer of the Company on or about
September 23, 1998, claiming $75,000 in damages. with respect to an alleged
contract for television production services and distribution of a syndicated
television program. the Complaint alleges breach of contract, fraud and deceit,
common count, open book account and account stated. The Complaint includes a
prayer for special damages according to proof, general damages according to
proof, attorney's fees according to proof, costs of suit, punitive damages and
interest. The Complaint also alleges that the Company is the alter ego of Mr.
Ruge. The Company and Ruge have filed an Answer denying liability and raising
affirmative defenses. The Company and Mr. Ruge deny liability to Plaintiff and
contend that Plaintiff breached its obligations to the Company and failed to
deliver the program to the Company on a timely basis as agreed. The Company
contends it suffered damages as a result thereof. The Company intends to defend
this matter vigorously. Trial is currently scheduled for November 30, 1999.
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<PAGE>
In September, 1999, the purchaser of the Banner.ad division made a
formal demand for the closing of the transaction and delivery of the division.
At present, the Company is negotiating this dispute and anticipates being able
to settle the matter without litigation, although no assurance can be given to
that effect.
Except as set forth above, the Company knows of no material legal
actions, pending or threatened, or judgment entered against the Company or any
executive officer or director of the Company, in his capacity as such.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
ISSUANCES OF COMMON STOCK FOR CASH AND SERVICES DURING 1998
In February, 1998, the Company issued 5,906,175 shares of its Common
Stock to the former shareholders of Go Phone, Inc. in connection with the
reorganization of Go Phone, Inc. with the Company.
During fiscal 1998, the Company sold 4,260,500 shares of its Common
Stock to eighteen investors, at prices ranging from $0.20 per share to $8.00 per
share, for aggregate proceeds of $564,319.
During fiscal 1998, the Company issued 280,000 shares of Common Stock
to four consultants for services performed in marketing the Company's business.
ISSUANCES OF COMMON STOCK FOR SERVICES DURING 1999
In January, 1999, the Company issued 500,000 shares of Common Stock to
Mid-Ocean Financial, an unaffiliated third party, for services to be rendered in
obtaining financing for the Company.
In February, 1999, the Company issued 312,500 shares of Common Stock to
two consultants for services to be rendered in obtaining financing for the
Company.
In May, 1999, the Company issued 9,715 shares of Common Stock to three
employees and consultants for accounting and hotel management services rendered.
In May, 1999 the trading price of the Company's Common Stock ranged from $1.0625
to $2.6875 per share.
In August, 1999, the Company issued 35,000 shares of Common Stock to
four employees and consultants for technical computer and advertising services.
In August, 1999, the trading price of the Company's Common Stock ranged from
$1.25 to $1.50 per share.
In September, 1999, the Company issued 55,000 shares of Common Stock to
four employees and consultants for services in promoting investment in the
Company's Common Stock. In September, 1999, the trading price of the Company's
Common Stock ranged from $0.6875 to $1.375 per share.
In October, 1999, the Company issued 500,000 shares of Common Stock to
Michael Ruge, an officer, director and principal shareholder of the Company,
for management services. In October, 1999, the Company issued a total of
1,632,500 shares of Common Stock to three consultants for future services in
promoting the business of the Company and in obtaining financing for the
Company. In October, 1999, the trading price of the Company's Common Stock
ranged from $0.6875 to $1.00 per share.
ISSUANCES OF COMMON STOCK FOR CASH DURING 1999
In April and May, 1999, the Company issued 189,248 shares of Common
Stock to eight persons for aggregate proceeds of $61,844.
In June, 1999, the Company issued 154,045 shares of Common Stock to
seven persons for aggregate proceeds of $204,246. In June, 1999, the trading
price of the Company's Common Stock ranged from $1.8125 to $2.6875 per share.
28
<PAGE>
In August, 1999, the Company issued 107,111 shares of Common Stock to
six persons for aggregate proceeds of $139,244. In August, 1999, the trading
price of the Company's Common Stock ranged from $1.25 to $1.50 per share.
In September, 1999, the Company issued 91,000 shares of Common Stock to
seven persons for aggregate proceeds of $68,250. In September, 1999, the trading
price of the Company's Common Stock ranged from $0.6875 to $1.375 per share.
ISSUANCES OF OPTIONS DURING 1999
In August and September, 1999, the Company granted a total of 360,000
options at exercise prices from $1.00 to $1.50 per share, to three consultants
for future services in connection with obtaining additional financing for the
Company.
Except as otherwise provided above, the Company believes all of the
foregoing issuances of securities were made solely in transactions exempt from
registration under Section 4(2) of the Securities Act.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws designate the
relative duties and responsibilities of the Company's officers, establish
procedures for actions by directors and stockholders and other items. The
Company's Certificate of Incorporation and Bylaws also contain extensive
indemnification provisions which will permit the Company to indemnify its
officers and directors to the maximum extent provided by Delaware law.
A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or other
enterprise, against expenses, including amounts paid in settlement and
attorney's fees actually and reasonably incurred by him or her in connection
with the defense or settlement of the action or suit if he or she acted in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation. Indemnification may not be
made for any claim, issue or matter as to which such a person has been adjudged
by a court of competent jurisdiction, after exhaustion of all appeals therefrom,
to be liable to the corporation or for amounts paid in settlement to the
corporation unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter therein, he or she must be indemnified by the corporation against
expenses, including attorney's fees, actually and reasonably incurred by him in
connection with the defense. Any indemnification under this section, unless
ordered by a court or advanced pursuant to this section, must be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances. The determination must be made: (a) by the stockholders; (b) by
the board of directors by majority vote of a quorum consisting of directors who
were not parties to the action, suit or proceeding; (c) if a majority vote of a
quorum consisting of directors who were not parties to the action, suit or
proceeding so orders, by independent legal counsel in a written opinion; or (d)
if a quorum consisting of directors who were not parties to the action, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
The certificate of incorporation, the bylaws or an agreement made by
the corporation may provide that the expenses of officers and directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he or she is not entitled to be indemnified
by the corporation. The provisions of this section do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
29
<PAGE>
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section: (a) does not exclude any other
rights to which a person seeking indemnification or advancement of expenses may
be entitled under the certificate of incorporation or any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, for either an action in
his or her official capacity or an action in another capacity while holding his
or her office, except that indemnification, unless ordered by a court pursuant
to this section or for the advancement of any director or officer if a final
adjudication establishes that his or her acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action; and (b) continues for a person who has ceased to be a director,
officer, employee or agent and inures to the benefit of the heirs, executors and
administrators of such a person.
On April 12 1999, the stockholders of the Company approved a form of
indemnification agreement ("Indemnification Agreement") to be entered into with
each of the Company's directors. All current officers and directors of the
Company and its subsidiaries have executed Indemnification Agreements with the
Company. These agreements include the following provisions:
First, in the event an action is instituted by the person who is
indemnified under the Indemnification Agreement ("Indemnitee") to enforce or
interpret any of the terms therein, Indemnitee shall be entitled to be paid all
costs and expenses, including reasonable attorneys' fees, incurred by the
Indemnitee with respect to such action, unless as a part or such action, a court
of competent jurisdiction determines that each of the material assertions made
by the Indemnitee were not made in good faith or were frivolous. In the event of
an action instituted by or in the name of the Company under the Indemnification
Agreement or to enforce or interpret any of the terms therein, the Indemnitee
shall be entitled to be paid all costs and expenses, including reasonable
attorneys' fees, incurred by the Indemnitee in the defense of such action,
unless as a part of such action the court determines that each of the
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.
Second, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an Indemnitee is not
entitled to full indemnification under the terms of the Indemnification
Agreements.
Third, in the event the Company shall be obligated to pay the expenses
of any proceeding against the Indemnitee, the Company shall be entitled to
assume the defense of such proceeding, with counsel approved by the indemnified
party, which approval shall not be unreasonably withheld, upon the delivery to
the Indemnitee of written notice of its election to do so. The Company shall
have the right to conduct such defense as it sees fit in its sole discretion,
including the right to settle any claim against Indemnitee without the consent
of the Indemnitee.
Fourth, indemnification provided by the Indemnification Agreements is
not exclusive of any rights to which the Indemnitee may be entitled under the
Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, or otherwise. The indemnification
provided under the Indemnification Agreements continues for any action taken or
not taken while serving in an indemnified capacity even though the Indemnitee
may have ceased to serve in such capacity at the time of the action, suit or
other covered proceeding.
Finally, the Indemnification Agreements provide for certain exceptions
to indemnification which include the following: (a) indemnification for
liabilities where the law prohibits indemnification; (b) indemnification or
advancement of expenses with respect to proceedings or claims initiated or
brought voluntarily by an Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under the Indemnification Agreements or any statute or law or
otherwise as required under Delaware law; and (c) indemnification for expenses
in the payment of profits arising from the purchase and sale by the Indemnitee
of securities in violation of Section 16(b) of the Exchange Act or any similar
or successor statute.
30
<PAGE>
PART F/S
GO CALL INC.
AUDITOR'S REPORT
AND CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
AUDITOR'S REPORT
To the Shareholders of
Go Call Inc.
We have audited the consolidated balance sheet of Go Call Inc. and its
subsidiary as at December 31, 1998 and December 31, 1997 and the consolidated
statements of operations, changes in shareholders' equity and cash flows for the
year ended December 31, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with Canadian 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 in the financial statements. An audit also includes assessing the
accounting principles used and the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of Go Call Inc. and its subsidiary as
at December 31, 1998 and December 31, 1997 and the results of their operations
and cash flows for the year ended December 31, 1998 in accordance with generally
accepted accounting principles in the United States.
/S/ COLLINS BARROW
Chatham, Ontario, Canada
November 14, 1999 CHARTERED ACCOUNTANTS
<PAGE>
GO CALL INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1998
Consolidated balance sheet 1
Consolidated statement of operations 2
Consolidated statement of changes in shareholders' equity 3
Consolidated statement of cash flows 4
Notes to consolidated financial statements 5 - 18
<PAGE>
1
<TABLE>
GO CALL INC.
CONSOLIDATED BALANCE SHEET
<CAPTION>
DECEMBER 31 SEPTEMBER 30
----------------------------------- -------------
1998 1997 1999
-------------- -------------- --------------
UNAUDITED
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 42,962 $ 5,913 $ 124,807
Accounts receivable, net (note 3) 124,367 16,128 353,747
Inventories 5,233 4,485 3,608
Deposits - - 97,551
Prepaids 42,126 4,961 74,895
-------------- -------------- --------------
214,688 31,487 654,608
-------------- -------------- --------------
LONG-TERM ASSETS
Investment in Country Star Restaurants, Inc.
- initial investment - - 728,440
- additional advances - - 235,355
-------------- -------------- --------------
- - 963,795
Due from shareholder - - 271,230
Property and equipment, net (note 4) 2,237,529 2,216,436 2,430,544
Intangible assets, net (note 6) 104,139 - 103,954
-------------- -------------- --------------
2,341,668 2,216,436 3,769,523
-------------- -------------- --------------
$ 2,556,356 $ 2,247,923 $ 4,424,131
============== ============== ==============
CURRENT LIABILITIES
Accounts payable and accrued charges $ 180,759 $ 147,109 $ 270,995
Foreign taxes payable 10,000 - 10,272
-------------- -------------- --------------
190,759 147,109 281,267
DUE TO SHAREHOLDERS 228,791 85,954 948,903
-------------- -------------- --------------
419,550 233,063 1,230,170
-------------- -------------- --------------
SHAREHOLDERS' EQUITY
Capital stock (note 8) 4,397,053 3,314,734 6,231,326
Deficit (2,107,940) (1,248,476) (2,522,979)
Accumulated other comprehensive loss (152,307) (51,398) (514,386)
-------------- -------------- --------------
2,136,806 2,014,860 3,193,961
-------------- -------------- --------------
$ 2,556,356 $ 2,247,923 $ 4,424,131
============== ============== ==============
</TABLE>
<PAGE>
2
<TABLE>
GO CALL INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30
--------------------------------- ---------------------------------
1998 1997 1999 1998
-------------- -------------- -------------- --------------
UNAUDITED UNAUDITED UNAUDITED
(SEE NOTE 17)
<S> <C> <C> <C> <C>
REVENUE
Wagers processed, net of payouts $ 81,677 $ - $ 967,299 $ -
Other revenue 833,128 387,318 44,979 513,911
-------------- -------------- -------------- --------------
914,805 387,318 1,012,278 513,911
-------------- -------------- -------------- --------------
EXPENSES
Direct expenses 578,489 336,492 571,061 290,637
Amortization 80,789 74,109 70,783 46,539
Interest 11,174 4,939 2,448 7,333
General and administrative 1,103,817 463,037 783,025 651,553
-------------- -------------- -------------- --------------
1,774,269 878,577 1,427,317 996,062
-------------- -------------- -------------- --------------
LOSS FROM OPERATIONS (859,464) (491,259) (415,039) (482,151)
WRITE DOWN HOTEL TO NET
REALIZABLE VALUE (note 5) - (500,000) - -
-------------- -------------- -------------- --------------
NET LOSS $ (859,464) $ (991,259) $ (415,039) $ (482,151)
============== ============== ============== ==============
LOSS PER COMMON SHARE $ (0.09) $ (0.12) $ (0.03) $ (0.06)
============== ============== ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 9,351,425 8,156,175 15,536,226 8,633,908
============== ============== ============== ==============
</TABLE>
NOTE THAT OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 DO NOT INCLUDE
THE RESULTS OF OPERATIONS OF COUNTRY STAR RESTAURANTS, INC., FOR THE PERIOD
SINCE THE DATE OF ACQUISITION, MARCH 11, 1999 TO SEPTEMBER 30, 1999.
<PAGE>
3
<TABLE>
GO CALL INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997 (unaudited) AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 (unaudited)
<CAPTION>
Common Accumulated other Total
Outstanding Stock Accumulated Comprehensive Convertible Shareholders'
Shares Capital Deficit Income(loss) Debt Equity
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996 UNAUDITED 2,250,000 $ 70,000 $ (70,000) $ - $ - $ -
Net loss - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
DECEMBER 31, 1997 AUDITED 2,250,000 70,000 (70,000) - - -
Acquisition on business
combination (note 2) 11,812,350 3,244,734 (1,178,476) (51,398) - 2,014,860
Cancellation of stock
following 1:2 split (5,906,175) - - - - -
------------ ------------ ------------ ------------ ------------ ------------
DECEMBER 31, 1997 RESTATED 8,156,175 3,314,734 (1,248,476) (51,398) - 2,014,860
Comprehensive income:
Net loss - - (859,464) - - (859,464)
Foreign currency translation
adjustment - - - (100,909) - (100,909)
Issuance of convertible debt - - - - 250,000 250,000
Subscriptions for stock 100,000 42,000 - - - 42,000
Issuance of stock for cash 4,260,500 564,319 - - - 564,319
Issuance of stock for product
or services 280,000 74,000 - - - 74,000
Conversion of debt into
stock 333,333 250,000 - - (250,000) -
Stock allocated for products,
not issued at year end 170,000 102,000 - - - 102,000
Stock allocated for cash, not
issued at year end 166,667 50,000 - - - 50,000
------------ ------------ ------------ ------------ ------------ ------------
DECEMBER 31, 1998 13,466,675 4,397,053 (2,107,940) (152,307) - 2,136,806
Comprehensive income:
Net loss - - (415,039) - - (415,039)
Foreign currency translation
adjustment - - - (362,079) - (362,079)
Issuance of stock for cash 4,139,102 1,834,273 - - - 1,834,273
------------ ------------ ------------ ------------ ------------ ------------
SEPTEMBER 30, 1999 UNAUDITED 17,605,777 $ 6,231,326 $(2,522,979) $ (514,386) $ - $ 3,193,961
============ ============ ============ ============ ============ ============
AUTHORIZED CAPITAL STOCK
100,000,000 COMMON SHARES, WITHOUT PAR VALUE
</TABLE>
<PAGE>
<TABLE>
4
GO CALL INC.
STATEMENT OF CASH FLOWS
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30
---------------------------------- ---------------------------------
1998 1997 1999 1998
-------------- -------------- -------------- --------------
UNAUDITED UNAUDITED UNAUDITED
(SEE NOTE 17)
<S> <C> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATIONS
Net loss $ (859,464) $ (991,259) $ (415,039) $ (482,151)
Items not requiring cash:
Amortization 80,789 74,109 70,783 46,539
Services paid with common shares 74,000 - - -
Write down of hotel (note 5) - 500,000 - -
-------------- -------------- -------------- --------------
(704,675) (417,160) (344,256) (435,612)
Net change in non-cash working capital
items affecting operations (note 14) (102,502) 223,264 (774,152) (32,123)
-------------- -------------- -------------- --------------
(807,177) (193,886) (1,118,408) (467,735)
-------------- -------------- -------------- --------------
INVESTING
Purchase of capital assets (97,355) (98,655) (263,613) (6,010)
Purchase of intangible assets (6,667) - - -
-------------- -------------- -------------- --------------
(104,022) (98.655) (263,613) (6,010)
-------------- -------------- -------------- --------------
FINANCING
Due to shareholders 142,838 97,903 720,112 9,813
Convertible debt issued 250,000 - - -
Issue of common shares 614,319 242,488 1,834,273 389,069
Redemption of common shares in Country
Star acquisitions (note 18) - - (728,440) -
Share subscriptions outstanding 42,000 - - -
-------------- -------------- -------------- --------------
1,049,157 340,391 1,825,945 398,882
-------------- -------------- -------------- --------------
EFFECT OF EXCHANGE RATE
CHANGES ON CASH (100,909) (51,398) (362,079) 132,156
-------------- -------------- -------------- --------------
CHANGE IN CASH POSITION 37,049 (3,548) 81,845 57,293
CASH POSITION, BEGINNING 5,913 9,461 42,962 5,913
-------------- -------------- -------------- --------------
CASH POSITION, ENDING $ 42,962 $ 5,913 $ 124,807 $ 63,206
============== ============== ============== ==============
</TABLE>
<PAGE>
5
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
The company was incorporated in the State of Louisiana on March 1, 1994, as Omni
Advantage Inc. Effective February 12, 1998, the company formed a subsidiary
company, Go Call Inc. in the State of Delaware. Pursuant to a Certificate of
Merger, February 17, 1998 the company has merged with the subsidiary company and
continues operations as Go Call Inc. The resulting company resides in the City
of Wilmington in the State of Delaware. The company holds a 100% interest in a
Canadian subsidiary corporation which provides telecommunication and Internet
products and services. All of the company's operations and related assets and
liabilities are held by the Canadian subsidiary.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements are reported using United States dollars,
measured using Canadian dollars and are presented on the basis of accounting
principles that are generally accepted in the United States.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company, Go
Call Inc. and its subsidiary, Go Call Canada Inc., which is wholly owned.
USE OF ESTIMATES
The consolidated financial statements have been prepared in conformity with
generally accepted accounting principles and as such, include estimates and
assumptions of management that affect the amounts reported in the consolidated
financial statements. Actual results could differ from these estimates.
INVENTORIES
Inventories are valued at the lower of cost and net realizable value. Cost is
determined on the first-in, first-out basis.
<PAGE>
6
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property, equipment and other long-lived assets is recorded at cost less
accumulated amortization, which is calculated using the diminishing balance
method. Cost includes major expenditures of improvements and replacement which
extend useful lives or increase capacity of the assets. Expenditures for
maintenance and repairs are expensed as incurred. The carrying amount of all
long-lived assets is evaluated periodically to determine if adjustment to the
amortization period or to the unamortized balance is warranted.
Costs for software that are incurred in the preliminary project stage are
expensed as incurred. Costs incurred during the application development stage
are capitalized and amortized over the estimated useful life of the software.
Amortization of assets other than leasehold improvements is calculated using the
following rates:
Buildings 5%
Equipment 20%
Furniture and fixtures 20%
Vehicles 30%
Computer 30%
Purchased computer software 100%
Half of the full rates are used in the year of acquisition.
Leasehold improvements are amortized using the straight-line method over 5
years.
The hotel did not commence active operations until January 1999, as a result, no
amortization has been calculated on the hotel assets for the current year.
OTHER ASSETS
Other assets consist of purchases of specialized software and advertising
rights. They are amortized over management's estimate of their useful life which
is two years.
<PAGE>
7
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
- --------------------------------------------------------------------------------
NON-CASH SECURITIES ISSUANCE
Shares of common stock issued for other than cash have been assigned amounts
equivalent to the fair value of the services or products received in exchange.
FOREIGN CURRENCY TRANSLATION
Foreign currency assets and liabilities have been translated into United States
dollar values at the rate of exchange prevailing at the balance sheet date.
Foreign currency revenues and expenses are translated at average exchange rates
for the period reported.
The company has determined that its Canadian operations are self-sustaining and
accordingly the local currency is the functional currency for reporting in the
financial statements. The resulting net foreign exchange adjustment on the
translation of their financial statements from Canadian to United States
currency has been deferred and included as a separate component of shareholders'
equity.
INCOME TAXES
The company uses the liability approach to accounting for income taxes. The
differences between the financial statement and tax basis of assets and
liabilities is determined annually. Deferred income tax assets and liabilities
are computed for those differences that have future tax consequences using the
currently enacted laws and rates that apply to the periods in which they are
expected to affect taxable income. Valuation allowances are established, if
necessary, to reduce deferred tax asset accounts to the amounts that will be
more likely than not be realized. Income tax expense is the current tax payable
or refundable for the period, plus or minus the net change in the deferred tax
asset or liability accounts.
<PAGE>
8
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
- --------------------------------------------------------------------------------
INCOME (LOSS) PER SHARE
The computation of income (loss) per share of common stock is based on the
weighted average number of shares and common share equivalents outstanding
during the periods presented.
All stock options and warrants have been excluded from the computation of
diluted loss per share as their effect would be antidilutive, and accordingly,
there is no reconciliation between basic and diluted loss per share for each of
the periods presented.
SEGMENT REPORTING
The company adopted SFAS No. 131 "Disclosure about Segments of an Enterprise and
Related Information" during 1998, which requires disclosures about products and
services, geographic areas and major customers. The adoption of SFAS No. 131 did
not affect results of operations or financial position. The company has provided
comparable information for prior periods.
RECENT PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133 "Accounting for Derivative Instruments
and Hedging Activities", which is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. The Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging securities. Currently,
as the Company has no derivative instruments, the adoption of SFAS No. 133 would
have not impact on the Company's financial condition or results of operations.
<PAGE>
9
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
2. BUSINESS COMBINATION
- --------------------------------------------------------------------------------
Pursuant to a share exchange agreement effective March 1, 1998, the company
issued 5,906,175 common shares representing 72% of the issued share capital of
the company to the shareholders of Go Phone Inc., a Canadian company, in
exchange for all of the issued and outstanding shares of Go Phone Inc. Go Phone
Inc. has been combined with an inoperative subsidiary of the company, Omni
Advantage Canada Limited and is now operating as Go Call Canada Inc. The
business combination has been accounted for as a reverse takeover by the
purchase method and accordingly, the net assets and results of operations of Go
Call Inc. have been included in the company's consolidated financial statements
since the date of acquisition. In accordance with reverse takeover accounting,
these financial statements are a continuation of Go Phone Inc. and the
comparative period presented is that of Go Phone Inc. The capital structure
(authorized shares and issued shares) of the company is that of Go Call Inc. and
other components of the shareholders' equity is that of Go Phone Inc.
At the date of acquisition, Go Call Inc. had nominal assets and liabilities and
Go Phone Inc. had assets and liabilities as follows:
Current assets $ 55,644
Property and equipment 2,253,956
Current liabilities (102,171)
Long-term liabilities (107,213)
Accumulated deficit 1,214,518
-------------
Net assets acquired $ 3,314,734
=============
- --------------------------------------------------------------------------------
3. ACCOUNTS RECEIVABLE 1998 1997
- --------------------------------------------------------------------------------
Trade accounts (net of allowance of $3,516) $ 56,467 $ 23,009
Share subscriptions 67,900 (6,881)
---------- ----------
$ 124,367 $ 16,128
========== ==========
<PAGE>
10
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
4. PROPERTY AND EQUIPMENT 1998 1997
- ------------------------------------------------------------------------------------------------------------------
Accumulated
Cost Amortization Net Net
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Land $ 70,000 $ - $ 70,000 $ 70,000
Hotel buildings 1,914,337 - 1,914,337 1,912,525
Equipment 34,999 6,995 28,004 10,292
Furniture and fixtures 109,009 18,105 90,994 84,064
Vehicles 46,057 13,151 32,906 35,197
Computer hardware 137,503 88,003 49,500 52,145
Computer software 16,161 11,513 4,648 7,667
Leasehold improvements 33,953 7,315 26,638 7,177
Telephone equipment 55,465 34,963 20,502 33,773
------------- ------------- ------------ ------------
$ 2,417,484 $ 179,955 $ 2,237,529 $ 2,216,436
============= ============= ============ ============
</TABLE>
- --------------------------------------------------------------------------------
5. HOTEL WRITE DOWN
- --------------------------------------------------------------------------------
In the prior period, the Company acquired a hotel in exchange for 3,360,000
common shares for an agreed upon purchase price of $2,500,000. Subsequent to the
purchase, the value of the land and buildings was appraised for $500,000 less
than the original purchase price. The hotel land and buildings have been written
down to reflect the estimated net recoverable value of the assets based on an
appraisal issued February 8, 1998.
<PAGE>
11
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
6. INTANGIBLE ASSETS 1998 1997
- --------------------------------------------------------------------------------
Software and distribution rights, at cost $ 108,667 $ -
Accumulated amortization (4,528) -
---------- ----------
$ 104,139 $ -
========== ==========
- --------------------------------------------------------------------------------
7. DUE TO SHAREHOLDERS 1998 1997
- --------------------------------------------------------------------------------
Unsecured advances from a shareholder, bearing
interest at the rate of 1% per month with no
specified due date $ 66,667 $ 70,092
Unsecured advances from a member of
management who is a shareholder, interest
free with no specified term of repayment 104,141 15,862
Unsecured advances from a shareholder, interest
free with no specified term of repayment 57,983 -
----------- -----------
$ 228,791 $ 85,954
=========== ===========
Interest in the amount of $8,040 was paid on the $66,667 advances indicated
above during 1998 ($2,102 - 1997).
- --------------------------------------------------------------------------------
8. CAPITAL STOCK
- --------------------------------------------------------------------------------
On February 1, 1998, at a Special Meeting of Shareholders, the Company's
shareholders approved the amalgamation of the Go Phone Inc. with Omni Advantage
Canada (see Note 2), including a share split of two Go Phone Inc. shares for one
Omni Advantage Canada Limited share. As a result, the number of shares issued
and outstanding decreased from 11,812,350 shares to 5,906,175 shares.
<PAGE>
12
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
9. STOCK COMPENSATION PLANS AND OTHER OPTION GRANTS
- --------------------------------------------------------------------------------
Subsequent to the year end, the Company's board of directors has approved a
Stock Option Plan to award options to the employees and consultants of the
Company, at the discretion of management, for compensation for services
rendered. The Company will account for activity issued under the stock option
plan according to the requirements of SFAS No. 123 "Accounting for Stock-Based
Compensation" in future fiscal periods.
Prior to the adoption of the Stock Option Plan, management had issued stock
options of the company in exchange for assets acquired by or services provided
to the company during the year. The fair value of the options granted during the
year has been determined to be nil.
As at December 31, 1998 options and warrants were issued as follows:
<TABLE>
<CAPTION>
Number Exercise
of shares Price Exercisable Dates
<S> <C> <C>
150,000 $1.00 November 13, 1999 - November 13, 2001
150,000 $2.00 November 13, 2000 - November 13, 2002
150,000 $2.00 November 13, 2001 - November 13, 2003
150,000 $2.00 November 13, 2002 - November 13, 2004
200,000 $5.00 November 13, 2002 - November 13, 2004
500,000 $1.00 expires December 31, 2004
52,000 $1.00 unlimited
50,000 15% discount
from market unlimited
</TABLE>
Warrants issued:
500,000 $3.00 unlimited
No options or warrants have been exercised as of the year end.
<PAGE>
13
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
10. INCOME TAXES 1998 1997
- --------------------------------------------------------------------------------
DEFERRED INCOME TAXES
Deferred tax assets consist of the following:
Gross deferred tax assets:
Net operating losses $ 386,760 $ 446,067
Amortization 31,534 62,363
----------- -----------
Net deferred tax assets 418,294 508,430
Valuation allowance (418,294) (508,430)
----------- -----------
$ - $ -
=========== ===========
The Company has provided a valuation allowance for net deferred tax assets of
its operations since realization of these benefits cannot be reasonably assured.
The change in the valuation allowance for net deferred tax assets from December
31, 1997 to December 31, 1998 related to additional losses in the period.
INCOME TAX RATE
The Company did not recognize any current income tax expense or benefit for
December 31, 1998 or December 31, 1997 and no cash was paid for income taxes in
December 31, 1998 or December 31, 1997. There are no reconciling items between
the effective rate of income tax assessed against the company's loss from
operations and the statutory rate of income tax of 44.62%.
FUTURE INCOME TAX BENEFITS
The Company and its Canadian subsidiary have not generated taxable income since
inception. As a result, no provision for income taxes has been made.
Income tax returns for the Canadian subsidiary have not yet been assessed by
Revenue Canada. As of March 1, 1998 the company's active operations have been in
Canada and as such, the Company is subject only to Canadian income tax on
operations.
The U.S. company has not filed income tax returns since its inception. As such,
it is unclear whether expenses for services rendered in exchange for common
shares could be deducted under current federal tax law. Assuming the recipients
of such services included the fair value of their services in income on their
personal and corporate tax returns, the Company could be able to deduct such
losses.
<PAGE>
14
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
10. INCOME TAXES (continued)
- --------------------------------------------------------------------------------
Assuming that the company is able to deduct as expenses the services rendered to
it in exchange for common shares, the Company can carry forward net operating
losses of approximately $1,350,000 for Canadian income tax purposes and $70,000
for U.S. income tax purposes, expiring in varying amounts until December 31,
2005 and December 31, 2011 respectively.
- --------------------------------------------------------------------------------
11. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION 1998 1997
- --------------------------------------------------------------------------------
In accordance with statutory requirements, the Board of Directors has determined
that the company and its subsidiary are engaged in one principal industry
segment, as a provider of E-commerce and other telecommunication and Internet
products and services as follows:.
Revenue:
E-commerce $ 81,677 $
Other telecommunication products and services 833,128 387,318
----------- -----------
$ 914,805 $ 387,318
=========== ===========
Loss from operations:
E-commerce $ 33,253 $
Other telecommunication products and services 826,211 491,259
----------- -----------
$ 859,464 $ 491,259
=========== ===========
Identifiable assets are located in Canada and in the
Dominican Republic as follows:
Canada $ 556,686 $ 250,065
Dominican Republic 1,999,670 1,997,858
----------- -----------
$2,556,356 $2,247,923
=========== ===========
<PAGE>
15
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
12. MEASUREMENT UNCERTAINTY
- --------------------------------------------------------------------------------
The company has recorded in its accounts payable certain accounts which are in
dispute but for which the company is being pursued for payment in the courts.
These liabilities have been recorded in the books for the full amount of the
claims The company may be able to successfully negotiate settlements for an
amount less than the full claim. Any changes in the conditions and circumstances
resulting in a change in the settlement amount of the liabilities, which could
be material, will be booked in the period of change.
The U.S. company has not filed income tax returns since its inception. As such,
it is unclear whether expenses for services rendered in exchange for common
shares could be deducted under current federal tax law. Assuming the recipients
of such services included the fair value of their services in income on their
personal and corporate tax returns, the company could be able to deduct such
losses. The company has not recognized any net value to these losses in the
calculation of its assets and liabilities. Any changes which would result in the
company not being able to utilize these losses would be adjusted through the
valuation allowance in the period of change.
- --------------------------------------------------------------------------------
13. FINANCIAL INSTRUMENTS AND CREDIT RISK
- --------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments consist of cash, accounts receivable,
accounts payable and amounts due to related parties. Unless otherwise noted, it
is management's opinion that the company is not exposed to significant interest,
currency or credit risks arising from these financial instruments. The fair
values of these financial instruments approximate their carrying values, unless
otherwise noted.
FOREIGN EXCHANGE RISK MANAGEMENT
The company does not use forward exchange contracts or other hedging instruments
to manage exposures resulting from foreign exchange fluctuations in the ordinary
course of business. Unless otherwise disclosed in the notes to the financial
statements, the estimated fair value of foreign denominated assets and
liabilities approximates carrying value, translated at the prevailing exchange
rates at year end.
<PAGE>
16
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
13. FINANCIAL INSTRUMENTS AND CREDIT RISK (continued)
- --------------------------------------------------------------------------------
CONCENTRATION OF CREDIT RISK
Of the trade receivables outstanding at December 31, 1998, $49,251 relates to
E-commerce proceeds due from the management organization contracted to process
client bids and pay outs. The company monitors the activity of the gaming
operations and deposits from the management organization on a regular basis.
- --------------------------------------------------------------------------------
14. NET CHANGE IN NON-CASH WORKING CAPITAL ITEMS 1998 1997
- --------------------------------------------------------------------------------
Accounts receivable $ (108,239) $ 147,822
Inventory (748) 13,300
Prepaid expenses (37,165) 5,271
Accounts payable and accrued charges 43,650 56,871
----------- ----------
$ (102,502) $ 223,264
=========== ==========
- --------------------------------------------------------------------------------
15. COMMITMENTS
- --------------------------------------------------------------------------------
The company's subsidiary leases a number of premises expiring December 31, 2002
and September 5, 2006. Minimum lease payments over the next five years are as
follows:
1999 $ 37,008
2000 37,008
2001 37,008
2002 37,008
2003 18,950
----------
$ 166,982
==========
<PAGE>
17
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. 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 prior to, on or
subsequent to January 1, 2000. It is not possible to be certain that all aspects
of the Year 2000 Issue affecting the entity, including those related to the
efforts of customers, suppliers or other third parties, will be fully resolved.
Therefore, an entity's ability to conduct normal business operations may be
impacted. This impact may range from significant system failure to minor errors.
The Company possesses a level of expertise in technology and has initiated a
review of all of the hardware and software to ensure that its computer related
applications will not fail or create erroneous results at the turn of the
century. In addition, the Company has contacted all major suppliers to ensure
that any potential disruptions caused by third parties will be minimized.
- --------------------------------------------------------------------------------
17. UNAUDITED COMPARATIVE FIGURES
- --------------------------------------------------------------------------------
Audited figures for the income and cash flows for the year ended December 31,
1997 were not available and have been provided by the company for information
purposes only. These figures were not audited or reviewed in any way by the
company's external auditors.
- --------------------------------------------------------------------------------
18. SUBSEQUENT EVENTS
- --------------------------------------------------------------------------------
INVESTMENT IN COUNTRY STAR RESTAURANTS, INC.
Pursuant to a Share Purchase Agreement dated March 11, 1999, the company has
issued 4,552,751 common shares in exchange for 650,393 common shares which,
based on preliminary information, represents controlling interest of Country
Star Restaurants, Inc., a company incorporated in the state of Delaware.
According to the preliminary unaudited balance of Country Star Restaurants,
Inc. as at December 31, 1998, the company had assets and liabilities valued at
approximately $4,837,000 and $3,555,000 respectively.
<PAGE>
18
GO CALL INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
18. SUBSEQUENT EVENTS (continued)
- --------------------------------------------------------------------------------
In a subsequent agreement, the Company repurchased and cancelled the 4,552,751
shares issued as consideration for Country Star Restaurants for cash in the
amount of $728,440. The company has retained a 92% controlling interest in
Country Star Restaurants.
According to the latest financial information available for Country Star
Restaurants, Inc., the company's independent certified public accountants
included an explanatory paragraph in their report for the years ended December
31, 1996 and December 31, 1997, which indicated a substantial doubt as to the
ability of the company to continue as a going concern due to significant losses
in 1996 and 1997 and cash flow shortages. The financial statements for the year
ended December 31, 1998 have not yet been finalized. Pursuant to SFAS 121,
Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of, there will likely be a material adjustment to the valuation of
certain assets owned by the company as of December 31, 1998. Management is
unable to estimate the financial affect of this acquisition on the future
operations of the Company.
Following regular business combination accounting, the acquisition of Country
Star Restaurants, Inc. would be accounted for as a purchase and accordingly the
assets and liabilities and results of operations of Country Star would be
included in the company's financial statements from the date of acquisition.
However, the Company plans to dispose of its investment in Country Star
Restaurants. For reporting purposes, the net assets and liabilities, results of
operations and cash flows from operating activities of this business will be
disclosed separately from those of continuing operations for future periods.
Management is currently pursuing options relating to the disposal of this
investment.
INVESTMENT IN GO CASH INC.
In July 1999, the Company incorporated Go Cash Inc. in the Turks and Caicos
Islands as a wholly owned subsidiary. Go Cash processes all wagering incomes and
customer payouts related to the Internet gambling operations of the Company. The
financial statements of the Company include the assets, liabilities and results
of operations and cash flows of Go Cash Inc. since the date of incorporation.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
2.1 Agreement of Reorganization with Go Phone, dated February 24, 1998
3.1 Revised and Restated Certificate of Incorporation. (1)
3.2 Bylaws. (1)
10.1 Form of Indemnification Agreement (1).
10.2 Stock Option Plan (1).
10.3 Asset Sale Agreement, dated August 16, 1999, for sale of Banner.ad.
27.1 Financial Data Schedule.
1. Filed on October 1, 1999 as part of the Company's Registration
Statement on Form 10-SB.
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
GO CALL, INC.
Dated: November 22, 1999 By: /s/ Michael Ruge
---------------------------
Michael Ruge,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Dated: November 22, 1999 By: /s/ Irving Insik Moon
---------------------------
Irving Insik Moon
Director
Dated: November 22, 1999 By: /s/ Michael Ruge
---------------------------
Michael Ruge
Director
_______________
AGREEMENT
AMONG
GO CALL, INC.,
OMNI ADVANTAGE CANADA LIMITED
AND
GO PHONE, INC.
_______________
February 20, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
----
<PAGE>
1. Definitions................................................... 1
2. Basic Transaction............................................. 5
(a) The Amalgamation..................................... 5
(b) The Closing.......................................... 5
(c) Effect of Amalgamation............................... 5
3. Representations and Warranties of the Parent.................. 6
(a) Organization of the Parent........................... 6
(b) Authorization of Transaction......................... 7
(c) Capitalization....................................... 7
(d) Subsidiaries......................................... 7
(e) Non-Contravention.................................... 8
(f) Brokers' Fees........................................ 8
(g) Title to Assets...................................... 8
(h) Financial Statements................................. 8
(i) Events Subsequent to Most Recent
Fiscal Year End.................................... 8
(j) Undisclosed Liabilities.............................. 11
(k) Related Party Transactions........................... 11
(l) Legal Compliance..................................... 11
(m) Litigation........................................... 11
(n) Tax Matters.......................................... 11
(o) Real Property........................................ 13
(p) Intellectual Property................................ 13
(q) Tangible Assets...................................... 13
(r) Contracts............................................ 13
(s) Powers of Attorney................................... 13
(t) Employees............................................ 13
(u) Shareholder Approval................................. 13
(v) Corporate Shell. . . . . . . . . . . . . . . . ...... 13
(w) Disclosure........................................... 13
4. Representations and Warranties of Go.......................... 14
(a) Organization of Go................................... 14
(b) Authorization of Transaction......................... 14
(c) Shareholder Approval................................. 14
(d) No Other Representations............................. 14
ii
<PAGE>
5. Representations and Warranties Concerning Newco............... 14
6. Conditions to Obligation to Close............................. 14
(a) Conditions to Obligation of Go....................... 14
(b) Conditions to Obligation of the Parent
and Newco.......................................... 15
(c) Change of Officers and Directors of the Parents...... 16
7. Remedies For Breaches of This Agreement....................... 16
(a) Survival of Representations and Warranties........... 16
(b) Indemnification Provisions for Benefit
of Go.............................................. 16
(c) Indemnification Provisions for Benefit
of the Parent...................................... 16
(d) Matters Involving Third Parties...................... 17
(e) Determination of Adverse Consequences................ 18
(f) Other Indemnification Provisions..................... 18
(g) Limitation on Indemnification........................ 18
8. Miscellaneous................................................. 19
(a) Press Releases and Public Announcements.............. 19
(b) No Third-Party Beneficiaries......................... 19
(c) Expenses............................................. 19
(d) Construction......................................... 19
(e) Specific Performance................................. 20
(f) Severability......................................... 20
(g) Counterparts......................................... 20
(h) Benefit.............................................. 20
(i) Notices and Addresses................................ 20
(j) Attorney's Fees...................................... 21
(k) Oral Evidence........................................ 21
(l) Governing Law........................................ 21
(m) Section or Paragraph Headings........................ 22
iii
<PAGE>
AGREEMENT
THIS AGREEMENT (the "Agreement") entered into as of this 20th day of
February, 1998, by and among Go Call, Inc. a Delaware corporation (the
"Parent"), Go Phone, Inc., an Ontario corporation ("Go") and Omni Advantage
Canada Limited, an Ontario corporation ("Newco"). The Parent, Go and Newco are
referred to collectively herein as the "Parties."
WHEREAS, the Parent owns 100% of the outstanding capital stock of
Newco;
WHEREAS, the Parent wishes to amalgamate Newco into Go as provided by
Ontario law in exchange for 100% of common stock ("Common Stock") of Go; and
WHEREAS, this Agreement provides for various rights and
responsibilities.
NOW, THEREFORE, in consideration of the mutual promises made herein,
the Parties adopt this plan of merger and agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, Liabilities, as
defined, obligations, Taxes, as defined, liens, losses, expenses, and
fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934.
"Amalgamation" has the meaning set forth in Section 2(a).
"Amalgamation Consideration" has the meaning set forth in
Section 2(c)(iv).
"Basis" means any past or present fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence,
event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.
"Closing" has the meaning set forth in Section 2(b) below.
"Closing Date" has the meaning set forth in Section 2(b)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
"Common Stock" means the common stock, $.001 par value, of the
Parent.
"Effective Time" has the meaning as set forth Section 2(c)(i).
"Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee
Pension Benefit Plan, as defined, (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including any multi-employer
Plan), or (d) Employee Welfare Benefit Plan, as defined, or material
fringe benefit plan or program.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Family Member" means any spouse, child, parent, father or
mother-in-law, brother or sister, brother or sister-in-law, nephew or
niece, and any corporation, partnership, joint venture, limited
liability company, association, trust, joint stock company,
unincorporated organization, or entity in which such a Person has any
ownership interest in (excluding any public company in which a Person
owns less than 5% of the outstanding shares of common stock).
"Financial Statements" has the meaning set forth in Section
3(h) below.
"GAAP" means United States generally accepted accounting
principles as in effect from time to time.
"Go" has the meaning set forth in the preface above.
"Go's Financial Statements" has the meaning set forth in
Section 4(h).
"Go Shares" means the common stock, $.001 par value of Go.
"Indemnified Party" has the meaning set forth in Section
9(d)(i) below.
"Indemnifying Party" has the meaning set forth in Section
9(d)(i) below.
"Intellectual Property" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all re-issuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, services marks, trade dress, logos, trade
names, and corporate names, together with all translations, adaptions,
derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals
2
<PAGE>
in connection therewith, (c) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection
therewith, (d) all mask works and all applications, registrations, and
renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation, (g) all
other proprietary rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Investigation" means any preliminary or other inquiry or any
informal or formal investigation being conducted by any federal, state,
or local government including any administrative agency.
"Knowledge" means actual knowledge after reasonable
investigation.
"Liabilities" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due), including any liability for Taxes, as defined.
"Most Recent Balance Sheet" means the balance sheet contained
within the Most Recent Financial Statements, as defined.
"Most Recent Financial Statements" has the meaning set forth
in Section 3(h) below.
"Most Recent Fiscal Period End" has the meaning set forth in
Section 3(h) below.
"Most Recent Fiscal Year End" has the meaning set forth in
Section 3(h) below.
"Newco" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with
respect to quantity and frequency).
"Parent" has the meaning set forth in the preface above and
includes Omni Advantage, Inc., a Louisiana corporation.
"Parties" has the meaning set forth in the preface above.
3
<PAGE>
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a
governmental entity (or any department, agency, or political
subdivision thereof).
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" shall mean the Securities and Exchange Commission.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a)
mechanic's, materialmen's, and similar liens, (b) liens for Taxes, as
defined, not yet due and payable or for Taxes, as defined, that the
taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of
money.
"Surviving Corporation" has the meaning set forth in Section
2(a) below.
"Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 9(d)
below.
2. Basic Transaction.
(a) THE AMALGAMATION. On and subject to the terms and
conditions of this Agreement, Newco shall amalgamate with Go (the
"Amalgamation") at the Effective Time, as defined. Go shall be the
corporation surviving the Amalgamation (the "Surviving Corporation").
(b) THE CLOSING. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of
Michael Harris, P.A., 712 U.S. Highway One, Suite 400, North Palm
Beach, Florida, 33408, at 9:30 a.m., local time, on the ___ day of
February, 1998, subject to the satisfaction or waiver of all conditions
to the obligation of the Parties to consummate the transactions
4
<PAGE>
contemplated hereby (other than conditions with respect to actions, the
respective Parties will take at the Closing itself), or such other date
as the Parties may mutually determine (the "Closing Date"). At the
Closing, (i) Newco shall deliver to Go the various certificates,
instruments and documents referred to in this Agreement, (ii) the
Parent shall deliver to Go the various certificates, instruments and
documents referred to in this Agreement including certificates
representing shares of Common Stock of the Parent, (iii) Go shall
deliver to Newco and the Parent the various certificates, instruments,
and documents referred to in this Agreement, and (iv) Newco and Go
shall file with the Director under the Business Corporations Act of
Ontario the Articles of Amalgamation in the form attached hereto as
Exhibit A (the "Articles of Amalgamation").
(c) EFFECT OF AMALGAMATION.
(i) GENERAL. The Amalgamation shall become effective
at the time (the "Effective Time") that Go and Newco file the
Articles of Amalgamation with the Director under the Business
Corporations Act of Ontario. The Amalgamation shall have the
effect set forth under Ontario law. The Surviving Corporation
may, at any time after the Effective Time, take any action
(including executing and delivering any documents) in the name
and on behalf of either the Surviving Corporation or Newco in
order to carry out and effectuate the transactions
contemplated by the Agreement.
(ii) DIRECTORS AND OFFICERS. The directors and
officers of the Surviving Corporation at and as of the
Effective Time shall be as disclosed on Schedule 2(c)(iii)
hereof.
(iii) CONVERSION OF GO SHARES. At and as of the
Effective Time, each Go Share shall be converted into the
right to receive one share of Common Stock for each Go Share
or an aggregate of 5,906,175 shares of Common Stock (the
"Amalgamation Consideration"). At or after the Closing, the
Parent shall deliver to the former Go shareholders the shares
of Common Stock of the Parent to which they are entitled at
such time or times as the former Go shareholders deliver their
certificates for Go Shares to the Parent duly endorsed with
signature guarantees or other such guarantees that may be
required by the Parent's transfer agent.
(iv) RESTRICTIONS ON THE PARENT'S COMMON STOCK. The
Common Stock of the Parent comprising the Amalgamation
Consideration is being issued to Go shareholders who are not
U.S. Persons as defined by Regulation S under the Securities
Act and to a limited number of U.S. Persons in reliance upon
exemption from registration pursuant to Section 4(2) of the
Securities Act and Rule 506 thereunder. In order to obtain
their shares of the Parent's Common Stock, such persons or
their duly authorized agents or attorneys will be required to
sign such customary documentation as the Parent's counsel
5
<PAGE>
deems reasonably necessary in order to ensure that the offers
and sales are exempt from registration under the Securities
Act pursuant to Regulation S or Section 4(2) and Rule 506. The
names, addresses and number of shares of the Parent to be
issued to Go shareholders is reflected on Schedule 2(c)(iv).
3. Representations and Warranties of the Parent. The Parent represents
and warrants to Go and its shareholders that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and shall be
correct and complete as of the Closing Date.
(a) ORGANIZATION OF THE PARENT. The Parent is a corporation
duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation. The Parent is duly authorized
to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the
failure to so qualify would not have a material adverse effect upon the
Parent. The Parent has full corporate power and authority to carry on
the business in which it is engaged in and to own and use the
properties owned and used by it. Schedule 3(a) lists the directors and
officers of the Parent. The Parent has delivered to Go correct and
complete copies of the charter and bylaws of the Parent. The minute
books (containing the records and meetings of the shareholders, the
board of directors, and any committees of the board of directors), the
stock certificate books and the stock record books of the Parent are
correct and complete. The Parent is not in default under or in
violation of any material provision of its charter or bylaws.
(b) AUTHORIZATION OF TRANSACTION. The Parent has the full
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Subject to execution, delivery and
authorization of the other Parties, this Agreement constitutes the
valid and legally binding obligation of the Parent, enforceable in
accordance with its terms and conditions. The Parent need not give any
notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
(c) CAPITALIZATION.
(i) The authorized capital stock of the Parent
consists of 20,000,000 shares of Common Stock, $.001 par value
of which 2,250,000 shares are outstanding. All of the issued
and outstanding shares are validly issued and are fully paid,
non-assessable and free of preemptive rights.
(ii) There are (A) no outstanding subscriptions,
options, calls, contracts, commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding
security, instrument or other agreement and also including any
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rights plan or other anti-takeover agreement, obligating
Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of
the Parent or obligating Parent to grant, extend or enter into
any agreement or commitment, and (B) no voting trusts, proxies
or other agreements or understandings to which the Parent is a
party or is bound with respect to the voting of any shares of
capital stock of the Parent. The Common Stock of the Parent
issued to the Go shareholders will be as of the Closing duly
authorized, validly issued, fully paid and non-assessable and
free of preemptive rights and liens or Security Interests.
(d) SUBSIDIARIES. Except as disclosed on Schedule 3(d), the
Parent has no Subsidiaries and does not own any interest in any
corporation, partnership, joint venture, limited liability company,
association, trust or entity.
(e) NON-CONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court
to which the Parent is subject or, (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or
cancel, or require any notice under, any agreement, contract, lease,
license, instrument, or other arrangement to which the Parent is a
party or by which it is bound or to which any of its assets is subject.
(f) BROKERS' FEES. The Parent has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which Go
could become liable or obligated.
(g) TITLE TO ASSETS. The Parent has good and marketable title
to, or a valid leasehold interest in, the properties and assets used by
it, located on its premises, shown on the Most Recent Balance Sheet or
acquired after the date thereof and, except as shown on Schedule 3(g),
are free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of
the Most Recent Balance Sheet. Schedule 3(g) also includes a list of
all assets owned and leased by the Parent with the designation as which
assets are leased.
(h) FINANCIAL STATEMENTS. Attached hereto as Exhibit B are the
following financial statements of the Parent (collectively the
"Financial Statements"): audited balance sheets and statements of
income, changes in shareholders' equity, and cash flow as of and for
the period ended September 30, 1997 (the "Most Recent Fiscal Period
End"). The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis through
the periods covered thereby, present fairly the financial condition of
the Parent as of such dates and the results of operations of the Parent
for such periods, are materially correct and complete, and are
consistent with the books and records of the Parent (which books and
records are materially correct and complete).
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(i) EVENTS SUBSEQUENT TO MOST RECENT FISCAL PERIOD END. Since
the Most Recent Fiscal Period End, there has not been any material
adverse change in the business, financial condition, operations,
results of operations or future prospects of the Parent. Without
limiting the generality of the foregoing, except as provided to the
contrary in this Agreement since that date:
(i) the Parent has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than
for a fair consideration in the Ordinary Course of Business;
(ii) except as otherwise disclosed in this Agreement,
the Parent has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts,
leases, and licenses);
(iii) except as listed elsewhere herein, no party
(including Target) has accelerated, terminated, modified, or
canceled any agreement, contract, lease or license (or series
of related agreements, contracts, leases, and licenses) to
which the Parent is a party or by which it is bound;
(iv) the Parent has not imposed any Security Interest
upon any of its assets, tangible or intangible, except as
listed elsewhere herein;
(v) except as listed elsewhere herein, the Parent has
not made any capital expenditure (or series of related capital
expenditures);
(vi) the Parent has not made any capital investment
in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital
investments, loans, and acquisitions);
(vii) the Parent has not issued any note, debenture,
bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized
lease obligation;
(viii) the Parent has not delayed or postponed the
payment of accounts payable and other Liabilities;
(ix) the Parent has not canceled, compromised,
waived, or released any right or claim (or series of related
rights and claims);
(x) the Parent has not granted any license or
sub-license of any rights under or with respect to any
Intellectual Property;
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(xi) there has been no change made or authorized in
the charter or bylaws of the Parent except for the change of
domicile merger;
(xii) the Parent has not issued, sold, or otherwise
disposed of any shares of capital stock, or granted any
options, warrants, or other rights to purchase or obtain
(including upon conversion, exchange, or exercise) any shares
of capital stock;
(xiii) the Parent has not declared, set aside, or
paid any dividend or made any distribution with respect to
shares of capital stock (whether in cash or in kind) or
redeemed, purchased, or otherwise acquired any hares of
capital stock;
(xiv) the Parent has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to
its property;
(xv) the Parent has not made any loan to, or entered
into any other transaction with, any of its employees;
(xvi) except as disclosed elsewhere herein, the
Parent has not entered into any employment contract, written
or oral, or modified the terms of any existing such contract
or agreement or entered into any collective bargaining
agreement;
(xvii) the Parent has not granted any increase in the
base compensation of any of its directors, officers or Family
Members or any employee;
(xviii) the Parent has not adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the
benefit of any of its directors, officers, or Family Members
(or taken any such action with respect to any other Employee
Benefit Plan);
(xix) the Parent has not made any other change in
employment terms for any of its directors and officers;
(xx) the Parent has not made or pledged to make any
charitable or other capital contribution;
(xxi) there has not been any other occurrence, event,
incident, action, failure to act, or transaction involving the
Parent;
(xxii) the Parent has not terminated or amended any
insurance policies nor has any insurance company done so with
regard to a policy paid for by the Parent; and
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<PAGE>
(xxiii) the Parent is not committed to any of the
foregoing.
(j) UNDISCLOSED LIABILITIES. The Parent does not have any
Liabilities (and there is no Basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability).
(k) RELATED PARTY TRANSACTIONS. Since October 1, 1997, the
Parent has not entered into any transactions or engaged in any business
with any director or officer of the Parent or any Family Member.
(l) LEGAL COMPLIANCE. The Parent, its directors, officers and
Affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Nor has the Parent, its directors, officers and
Affiliates received any oral or written notice from any other Person
regarding any of the foregoing.
(m) LITIGATION. Except as disclosed on Schedule 3(m), the
Parent is not (i) subject to any outstanding injunction, judgment,
order, decree, ruling, or charge, and (ii) to the Knowledge of any of
the officers and directors of the Parent is not a party to any action,
suit, proceeding, hearing or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state,
provincial, local or foreign jurisdiction or before any arbitrator, nor
has any threat been made concerning the filing of any of the foregoing.
(n) TAX MATTERS.
(i) Except as disclosed on Schedule (n)(i), the
Parent has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all material
respects. All Taxes owed by the Parent (whether or not shown
on any Tax Return) have been paid. the Parent currently is not
the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made by an authority in
a jurisdiction where the Parent does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction.
There are no Security Interests on any of the assets of the
Parent that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) the Parent has withheld and paid all Taxes
required to have been withheld and, except as may not yet be
required in the Ordinary Course of Business, has paid in
connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder, or other third
party.
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(iii) Neither the Parent or any director, officer (or
employee responsible for Tax matters) of Parent expects any
authority to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of Parent either (A)
claimed or raised by any authority in writing, or (B) as to
which the directors and officers (and employees responsible
for Tax matters) of the Parent has Knowledge based upon
personal contact with any agent of such authority. Schedule
3(m)(iii) lists all federal, state, local, and foreign income
Tax Returns filed with respect the Parent for taxable periods
ended on or after December 31, 1994, indicates those Tax
Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Parent
has delivered to Go correct and complete copies of all
federal, state and local income Tax Returns, examination
reports, and statements of deficiencies assessed against or
agreed to by the Parent since December 31, 1994.
(iv) The Parent has not waived any statute of
limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(v) The Parent has not made any payments, is not
obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it
to make any payments that will not be deductible under Code
Section 280G. the Parent has not been a United States real
property holding corporation within the meaning of Code
Section 897(c)(2) during the applicable period specified in
Code Section 897(c)(1)(A)(ii). the Parent has disclosed on its
federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal
income Tax within the meaning of Code Section 6662. the Parent
is not a party to any Tax allocation or sharing agreement. the
Parent (A) has not been a member of an Affiliated Group filing
a consolidated federal income Tax Return, or (B) has no
Liability for the Taxes of any Person (other than the Parent)
under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) Schedule 3(n)(vi) sets forth as of the most
recent practicable date the basis of the Parent in its assets.
(o) REAL PROPERTY. The Parent does not own or lease any direct
or indirect interest in real property;
(p) INTELLECTUAL PROPERTY. The Parent does not own any
Intellectual Property.
(q) TANGIBLE ASSETS. The Parent does not own or lease any
buildings, machinery, equipment, or other tangible assets necessary for
the conduct of its business as presently conducted and as presently
proposed to be conducted.
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(r) CONTRACTS. Except as listed on Schedule 3(r), the Parent
is not a party to any oral or written contracts or agreements.
(s) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Parent.
(t) EMPLOYEES. To the Knowledge of the Parent and its
directors and officers, the Parent has never had any employees.
(u) SHAREHOLDER APPROVAL. The shareholders of the Parent do
not have to approve the Amalgamation. As the shareholder of Newco, the
Parent has authorized Newco to enter into the Amalgamation with Go. The
Parent shall not revoke its vote or consent in favor of the
Amalgamation.
(v) CORPORATE SHELL. The Parent is a corporate shell, has no
assets or liabilities and has never engaged in any business.
(w) DISCLOSURE. The representations and warranties contained
in this Section 3 do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements and information contained in this Section 3 not misleading.
4. Representations and Warranties of Go. Go represents and warrants to
the Parent that the statements contained in this Section 4 are to its Knowledge
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date.
(a) ORGANIZATION OF GO. Go is a corporation duly organized,
validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. Go is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction
where such qualification is required except where the failure to so
qualify would not have a material adverse effect upon Go.
(b) AUTHORIZATION OF TRANSACTION. Go has the full power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder. Subject to execution, delivery and authorization
of the other Parties hereto, this Agreement constitutes the valid and
legally binding obligation of Go.
(c) SHAREHOLDER APPROVAL. The shareholders of Go have approved
the Amalgamation by the required vote necessary under the laws of the
province of Ontario.
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<PAGE>
(d) NO OTHER REPRESENTATIONS. Go shall not be deemed to have
made to the Parent any representation or warranty other than as is
expressly made in Sections 4(a) through (c).
5. Representations and Warranties Concerning Newco. The Parent
represents and warrants to Go that the Parent has caused Newco to be organized
shortly prior to the date of this Agreement and that Newco has no assets and has
not engaged in any business transaction or incurred any liabilities except for
organizational costs. The Parent has caused Newco to issue 100 shares of its
common stock to the Parent in exchange for 5,906,175 shares of Common Stock of
the Parent. The Parent has not caused Newco to issue any additional securities.
6. Conditions to Obligation to Close.
(a) CONDITIONS TO OBLIGATION OF GO. The obligation of Go to
consummate the transactions to be performed by each in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3 above shall be true and correct in all material
respects at and as of the Closing Date;
(ii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, provincial,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of
the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect adversely the
right of Go shareholders to own the Parent's Common Stock and
to control the Parent, or (D) affect adversely the right of Go
to own its assets and to operate its business (and no such
injunction, judgment, order, decree, ruling, or charge shall
be in effect);
(iii) The Parent shall have delivered to Go a
certificate to the effect that each of the conditions
specified above in Section 6(a)(i)-(ii) is satisfied in all
respects;
(iv) Go shall have received from counsel to the
Parent an opinion in form and substance as set forth in
Exhibit D attached hereto, addressed to Go, and dated as of
the Closing Date;
(v) the Parent shall have reincorporated under the
laws of the State of Delaware under the name Go Call, Inc. or
such other name as shall have been requested by Go;
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<PAGE>
(vi) the Parent shall have received all necessary
consents and approval to commence trading on the NASD OTC
Bulletin Board; and
(vii) William Cooper, Esq. certifies in writing that
his firm's fees and expenses for services rendered to the
Parent or Newco are not the legal responsibility of such
corporations.
Go may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE PARENT AND NEWCO. The
obligation of the Parent and Newco to consummate the transactions to be
performed by them in connection with the Closing is subject to
satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 4 above shall be true and correct in all material
respects at and as of the Closing Date, and
(ii) no action, suit, or proceeding shall be pending
or threatened before any court or quasi-judicial or
administrative agency of any federal, state, provincial,
local, or foreign jurisdiction or before any arbitrator
wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any
of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in
effect);
(c) CHANGE OF OFFICERS AND DIRECTORS OF THE PARENT. At the
Closing, the present officers and directors of the Parent shall have
resigned and appointed Michael Ruge and such other persons he may
designate to the board of directors of the Parent and appointed Michael
Ruge as the president treasurer and secretary of the Parent.
7. Remedies For Breaches of This Agreement.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereunder and continue in full
force and effect for a period of two years (subject to any applicable
statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF GO.
(i) In the event the Parent breaches (or in the event
any third party alleges facts that, if true, would mean the
Parent has breached) any of its representations, warranties,
and covenants contained herein and provided that Go make a
written claim for indemnification against and Parent pursuant
to Section 7(d)(i) below, then the Parent agrees to indemnify
Go from and against the entirety of any Adverse Consequences
Go may suffer through and after the date of the claim for
indemnification resulting from, arising out of, relating to,
in the nature of, or caused by the breach (or the alleged
breach).
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<PAGE>
(ii) the Parent agrees to indemnify Go from and
against the entirety of any Adverse Consequences Go may suffer
resulting from, arising out of, relating to, in the nature of,
or caused by any claim for Taxes due as the result of the
operation of the Parent's business through the date of the
Amalgamation.
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE PARENT. In
the event that Go breaches (or in the event any third party alleges
facts that, if true, would mean that Go has breached) any of its
representations, warranties, and covenants contained herein, and
provided that the Parent makes a claim for indemnification against Go
pursuant to Section 7(d)(i) below, then Go agrees to indemnify the
Parent from and against the entirety of any Adverse Consequences the
Parent may suffer through and after the date of the claim for
indemnification caused proximately by the breach (or the alleged
breach).
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third
Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying
Party") under this Section 7, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder
unless (and then solely to the extent) the Indemnified Party
thereby is prejudiced.
(ii) Any Indemnifying Party shall have the right to
defend the Indemnified Party against the Third Party Claim
with counsel of its choice satisfactory to the Indemnified
Party so long as (A) the Indemnifying Party notifies the
Indemnified Party in writing within 10 days after the
Indemnified Party has given notice of the Third Party Claim
that the Indemnifying Party shall indemnify the Indemnified
Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer as provided in
Section 7(b)(i) or Section 7(c)(ii) above, as may be
applicable, (B) the Indemnifying Party provides the
Indemnified Party with evidence acceptable to the Indemnified
Party that the Indemnifying Party shall have the financial
resources to defend against the Third Party Claim and fulfill
its indemnification obligations hereunder, (C) the Third Party
Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an
adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice
materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
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<PAGE>
(iii) So long as the Indemnifying Party is conducting
the defense of the Third Party Claim in accordance with
Section 7(d)(i) above, (A) the Indemnified Party may retain
separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (B) the
Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C)
the Indemnifying Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section
7(d)(ii) above is or becomes unsatisfied, however, (A) the
Indemnified Party may defend against, and consent to the entry
of any judgment or enter into any settlement with respect to,
the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Parties need not consult with, or obtain
any consent from, any Indemnifying Parties in connection
therewith), (B) the Indemnifying Parties shall reimburse the
Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable
attorneys' fees and expenses), and (C) the Indemnifying
Parties shall remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 7.
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall
take into account the time cost of money (using the CitiBank N.A.
publicly announced prime rate as the discount rate) in determining
Adverse Consequences for purposes of this Section 7.
(f) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation
of, any statutory, equitable, or common law remedy any Party may have
for breach of representation, warranty, or covenant.
(g) LIMITATION ON INDEMNIFICATION. All of the indemnification
provisions set forth in this Section 7 including the contractual
provisions and the other remedies provided for in Section 7(f) above
are subject to the limitation that neither Go on one hand nor the
Parent on the other hand shall have any obligation to indemnify the
other Parties unless and until the other Parties have suffered Adverse
Consequences from any individual breaches in the amount of $10,000 or
more or an aggregate of $25,000 or more. Provided, however, none of the
Parties shall have any Liability for any Adverse Consequences less than
an aggregate of $50,000 arising from or relating to any matter the
facts of which such Parties did not know and could not have in the
exercise of reasonable diligence known. After any of the foregoing
aggregate thresholds are reached, the Indemnifying Party shall be
obligated to indemnify the Indemnified Party from and against all such
Adverse Consequences relating back to the first dollar.
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<PAGE>
8. Miscellaneous.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall
issue any press release, make any public announcement or otherwise
disclose any information relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of
the other Parties. The Parties may also make disclosure to attorneys,
accountants and financial advisors acting on their respective behalf.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties
and their respective successors and permitted assigns and upon the Go
shareholders.
(c) EXPENSES. Each of the Parties to this transaction shall
bear his or its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the
transactions contemplated hereby except to the extent this Agreement
provides otherwise. The Parent's legal fees and costs shall be paid by
a third party.
(d) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any of the provisions of this Agreement. Any
reference to any federal, state, provincial, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect,
the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall
not detract from or mitigate the fact that the Party is in breach of
the first representation, warranty, or covenant.
(e) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance
with their specific terms or otherwise are breached. Accordingly, each
of the Parties agrees that the other Parties shall be entitled, without
17
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the necessity of pleading or proving irreparable harm or lack of an
adequate remedy at law, to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter in addition
to any other remedy to which they may be entitled, at law or in equity.
(f) SEVERABILITY. In the event any parts of this Agreement are
found to be void, the remaining provisions of this Agreement shall
nevertheless be binding with the same effect as though the void parts
were deleted.
(g) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. The
execution of this Agreement may be by actual or facsimile signature.
(h) BENEFIT. This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their legal representatives,
successors and assigns and to the benefit of the Go shareholders.
(i) NOTICES AND ADDRESSES. All notices, offers, acceptance and
any other acts under this Agreement (except payment) shall be in
writing, and shall be sufficiently given if delivered to the addressees
in person, by Federal Express or similar receipted delivery, by
facsimile delivery or, if mailed, postage prepaid, by certified mail,
return receipt requested, as follows:
Go: Mr. Michael Ruge
Go Phone, Inc.
15 Queen Street
Cambridge, Ontario N3C2A7
Facsimile: (519) 651-0457
with a copy to: Michael D. Harris, Esquire
Michael Harris, P.A.
712 U.S. Highway One
Suite 400
North Palm Beach, FL 33408
Facsimile: (561) 845-0108
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Parent: Hershey Moss, President
Omni Advantage, Inc.
759 Cedar Field Court
Town & Country, MO 63017
Facsimile: (314) 991-1226
with a copy to: William Cooper, Esq.
Nangle, Cooper, Niemann &
Bitting, L.L.C.
1500 Chromalloy Plaza
120 S. Central
St. Louis, MO 63105
Facsimile: (314) 863-1335
or to such other address as any of them, by notice to the other may
designate from time to time. The transmission confirmation receipt from
the sender's facsimile machine shall be conclusive evidence of
successful facsimile delivery. Time shall be counted to, or from, as
the case may be, the delivery in person or by mailing.
(j) ATTORNEY'S FEES. In the event that there is any
controversy or claim arising out of or relating to this Agreement, or
to the interpretation, breach or enforcement thereof, and any action or
proceeding is commenced to enforce the provisions of this Agreement,
the prevailing Parties shall be entitled to an award by the court or
arbitrator, as appropriate, of reasonable attorney's fees, costs and
expenses.
(k) ORAL EVIDENCE. This Agreement constitutes the entire
Agreement between the Parties and supersedes all prior oral and written
agreements between the parties hereto with respect to the subject
matter hereof. Neither this Agreement nor any provision hereof may be
changed, waived, discharged or terminated orally, except by a statement
in writing signed by the party or parties against which enforcement or
the change, waiver discharge or termination is sought.
(l) GOVERNING LAW. This Agreement and any dispute,
disagreement, or issue of construction or interpretation arising
hereunder whether relating to its execution, its validity, the
obligations provided herein or performance shall be governed or
interpreted according to the internal laws of the State of Delaware
without regard to choice of law considerations.
(m) SECTION OR PARAGRAPH HEADINGS. Section headings herein
have been inserted for reference only and shall not be deemed to limit
or otherwise affect, in any matter, or be deemed to interpret in whole
or in part any of the terms or provisions of this Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have set their hand and seals as
of the date first above written.
WITNESSES: GO PHONE, INC.
_______________
By: /S/ Michael Ruge,
----------------------------
_______________ Michael Ruge, President
OMNI ADVANTAGE CANADA LIMITED
_______________
By: /S/ HERSHEY MOSS,
----------------------------
_______________ Hershey Moss, President
GO CALL, INC.
_______________
By: /S/ HERSHEY MOSS,
----------------------------
_______________ Director
ASSET FOR COMMON STOCK EXCHANGE AGREEMENT
ASSET FOR COMMON STOCK EXCHANGE AGREEMENT is made as of this 16th day of August
1999 by and between TIDE LINES, LLC ("TL"), a Nevada Limited Liability Company
and GO CALL INC, a Delaware Corporation ("GOCA).
THE PARTIES AGREE AS FOLLOWS:
1 The Exchange
1.1 Subject to the terms and conditions of this Agreement, TL agrees at the
closing to issue nine hundred thousand (900,000) shares of Common Stock,
par value $,001 per share (the "Stock') for all of the Assets of the
BANNER AD division of GOCA (BANNER). The Assets being acquired are shown
at Exhibit A hereto (Asset).
TL hereby warrants that it has authorized only 10 million shares of the
Stock.
The above exchange is based on TL having no more than 10,000,000 common
shares outstanding at the time of the closing as defined in paragraph
1.3 below. In the event that TL has a Stock split or a reverse Stock
split, then the conversion price per 1.1 above per share shall be
adjusted according to the Stock split ratio. By way of example, if the
Stock is split 5 for 1 (or a reverse split 1 for 5), then the optional
conversion price in paragraph 1.1 shall be divided by 5.
1.3 The Closing of the exchange of the respective shares of Common Stock and
Assets shall take place on or before August 31, 1999 or at such other
time and place as the Parties mutually agree upon in writing (which time
and place are designated as the "Closing Date"). At the Closing, TL
shall. deliver to GOCA, certificates representing the respective number
of shares of the Stock, together with a Stock power transferring the
title of the Stock to GOCA. GOCA shall deliver to TL the BANNER Assets
listed at Exhibit A hereto.
1.4 This Agreement is subject to the approval of the. Board of Directors of
both GOCA and TL and said approval or disapproval shall be voted upon no
later that August 24, 1999 by either party.
1.5 [Omitted]
1.6 TL agrees to provide GOCA with banner placement services equal to amount
not less than 10% of the available, sellable, unused capacity of
GoBanner. TL reserves the right to defer banner placement obligations to
NEW BANNER CO if banners relate to companies not having content
compatible to TL's "family orientated" focus
32
<PAGE>
2 Representations and Warranties of TL
Except as expressly set forth in any Schedule of Exceptions furnished
to GOCA with respect to the subparagraphs hereof TL hereby represents
and warrants to GOCA the following:
2.1 Organization: Good standing and Qualification; TL is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada and has all. requisite corporate power and authority to
carry on its business as now conducted. TL is duly qualified to
transact business and is in good standing in each jurisdiction in which
the failures to qualify would have material adverse effect on its
business or properties.
2.2 Capitalization: The authorized capital of TL consists of 10,000,000
shares authorized of Common Stock, par value $.001 per share,
2.3 Subsidiaries. TL currently has no subsidiaries.
2.4 Authorization: All corporate action on the part of TL necessary for the
authorization, execution and delivery of this Agreement, and the
performance or all obligations of TL hereunder has been taken or will
be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of TL enforceable in accordance with its
terms.
Valid Issuance of Common Stock:
(i) The Stock which is being exchanged by TL for the Assets of BANNER
hereunder, when delivered in accordance with the terms hereof for the
consideration expressed herein, will be issued in compliance with all
applicable federal and state laws.
(ii) The outstanding shares of Stock are duly and validly authorized and
issued fully paid and non-assessable.
2.6 Governmental Consents: No consent, approval order or authorization or
registration, qualification, designation, declaration or filing with
any federal, state, local or provincial governmental authority on the
part of TL is required in connection with the consummation of the
transactions contemplated by this Agreement.
2.7 Litigation: There is no action, suit proceeding or investigation
currently threatened against TL which questions the validity of this
Agreement or the right of TL to enter into it, or to consummate the
transactions contemplated hereby, or which might result in the
aggregate in any material adverse changes in the Assets, condition,
affairs or prospects of TL. TL is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court of government agency or instrumentality.
<PAGE>
2.8 Disclosure: TL has fully provided GOCA with all the information, which
the Parties have requested, for deciding whether to exchange the Stock
for the Assets of BANNER.
2.9 Corporate Documents: The Articles of incorporation and Bylaws of TL and
the Certificate of Determination for the Common Stock are in the form
previously provided to the Parties.
2.10 Title of Property and Assets: TL owns its property and Assets free and
clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business
and which do not materially impair TL's ownership or use of such
property or Assets except as reflected on the financial statements
described in Section 2.11 below.
2.11 Insurance: TL does not maintain any insurance as of the date of this
Agreement.
2.12 Labor Agreements and Actions: TL is not bound by or subject to (and
none of its Assets or properties is bound by or subject to) any
written, oral contracts, commitment of arrangement with any labor
union, and no labor Union has requested or, to the knowledge of TL, has
sought to represent any of the employees, representatives or agents of
TL.
2.13 Good Title: TL is the issuer of the shares of Stock pursuant hereto and
shall bear the legend on said certificates as Rule 144 Stock. TL shall
issue said shares free and clear of any liens, claims or encumbrances
(other than the Rule 144 legend) of any kind whatsoever.
2.14 Absence of Undisclosed Liabilities: TL has no material liabilities or
obligations, either accrued or unaccrued, fixed or contingent, which
have not been reflected in the Financial Statements.
2.15 Tax Returns and Audits: TL has filed, or shall. have filed by the
Closing dated, all income, franchise and other tax returns and reports
of every nature required to be filed by accurately reflecting any and
all net operating losses tax credit carryovers and carrybacks, and
taxes owing to the Unites States or any other government or any
subdivision thereof domestic or foreign, state of local, or any other
taxing authority, and has paid in full all taxes shown on said returns
to be due and owing. There are and will hereafter be no tax
deficiencies (including penalties and interest) of any kind assessed
against TL, with respect to any taxable periods ending on or before the
Closing, other than tax deficiencies relating solely to an election (or
deemed election.) pursuant to Section 338 of Internal Revenue Code of
1986, as amended with respect to the exchange of Assets for shares or
Stock of TL or other transfer of ownership of TL occurring on or prior
to the closing which GOCA hereto agrees shall not be treated as a
liability of TL or a breach of or a misstatement in any representation
or warranty of TL made herein
<PAGE>
3 Representations and Warranties of GOCA
3.1 Organization: Good standing and qualification; GOCA is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted.. TL is duly
qualified to transact business and is in good standing in each
jurisdiction in which the failures to qualify would have material
adverse effect on its business or properties.
3.2 Capitalization: The authorized capital of GOCA consists of 20,000,000
shares authorized of Common Stock, par value $.001 per share. GOCA has
no Preferred Stock.
3.3 Authorization: All corporate action on the part of GOCA necessary for
the authorization, execution and delivery of this Agreement, and the
performance or all obligations of GOCA hereunder has been taken or will
be taken prior to the Closing, and this Agreement constitutes a valid
and legally binding obligation of GOCA enforceable in accordance with
its terms.
3.4 Governmental Contents: No consent, approval order or authorization or
registration, qualification, designation, declaration or filing with
any federal, state, local or provincial governmental authority on the
part of GOCA is required in connection with the consummation of the
transactions contemplated by this Agreement.
3.5 Litigation There is no action, suit proceeding or investigation
currently threatened against GOCA which questions the validity of this
Agreement or the right of GOCA to enter into it, or to consummate the
transactions contemplated hereby, or which might result in the
aggregate in any material adverse changes in the Assets, condition,
affairs or prospects of GOCA. GOCA is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any
court of government agency or instrumentality.
3.6 Disclosure: GOCA has fully provided TL with all the information, which
the TL has requested, for deciding whether to exchange the Stock for
the Assets of BANNER.
3.7 Title of Property and Assets: GOCA owns the Banner Assets free and
clear of all mortgages, liens, loans and encumbrances.
3.8 Changes.-
GOCA shall inform TL in the event there are any material changes to the
BANNER Assets or the values therein at the time of the Closing.
3.9 Good Title: GOCA is the owner of BANNER Assets. GOCA shall deliver said
Assets free and clear of any liens, claims or encumbrances of any kind
whatsoever.
<PAGE>
4 Conditions of the Obligation of TL at Closing
The obligations of TL under this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:
4.1 Representations and Warranties of TL: the representations and
warranties of TL contained in Section 2 hereof shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
4.2 Performance by TL: TL shall have conformed with all. agreements,
obligations and conditions contained in the Agreement to which it is
subject on or before Closing.
5 Conditions of the Obligations of GOCA at Closing.
The obligations of GOCA under this Agreement are subject to the
fulfillment on or before the Closing of each of the following
conditions:
5.1 Representations and Warranties of GOCA: The representations and
warranties of GOCA contained in Section 3 hereof shall be true on and
as of the Closing with the same effect as though such representations
and warranties had been made on and as of the date of such Closing.
5.2 Performance by GOCA: GOCA shall. have conformed with all agreements,
obligations aid conditions contained in the Agreement to which it is
subject on or before Closing.
6 Survival of Representations and Warranties and Indemnification
6.1 Survival of Representations and Warranties: Notwithstanding the Closing
of this Agreement, the representations and warranties of TL And GOCA
contained in this Agreement shall survive the Closing until the date
one (1) year after the date of the Closing, provided however that as to
any breach, or misstatement in, any misrepresentation or warranty as to
which GOCA has given notice to TL or TL has given notice to GOCA on or
prior to the expiration or such (1) year period, the same shall
continue to survive beyond said period, but only as to the matters
contained in such notice.
6.2 Indemnification by TL: TL covenants and agrees to hold GOCA harmless
from any and all costs, expenses, losses, damages and liabilities
incurred or suffered directly or indirectly by GOCA (including
reasonable legal fees and costs) proximately resulting from or
attributable to the material breach of a material misstatement in, any
one or more of the representations or warranties of TL made in or
pursuant to this Agreement. Notwithstanding any other provision of this
Agreement COCA acknowledges and agrees that no representation of TL
hereunder or omission from this Agreement or its schedules shall. be
deemed materially misleading and no warranty hereunder by TL shall be
deemed breached if GOCA has obtained accurate information regarding the
matter prior to Closing.
<PAGE>
6.3 Indemnification by GOCA. GOCA covenants and agrees to hold TL harmless
from any and all costs, expenses, losses, damages and liabilities
incurred or suffered directly or indirectly by TL (including reasonable
legal fees and costs) proximately resulting from or attributable to the
material breach of a material misstatement in, any one or more of the
representations or warranties made in or pursuant to this Agreement.
6.4 Defense Against Asserted Claims: Many claim or assertion or liability
is made by a third party against a party indemnified pursuant to this
Section 6 (the "Indemnified Party') based on any liability or absence
of right which if established, would constitute a matter for which the
Indemnified Party would be entitled to indemnification by another party
hereto (the "Indemnifying Party") the indemnified party shall with
reasonable promptness five to the Indemnified Party written notice of
the claim or assertion of liability and request the Indemnifying Party
to defend same. The Indemnifying Party shall have the right to defense
against such liability or assertion, in which event the Indemnifying
Party shall give written notice to the Indemnifying Party of the
acceptance of defense of such claim and the identity of counsel
selected by the Indemnifying Party with respect to such matters. The
Indemnified Party shall be entitled to participate with the
Indemnifying Party in such defense and also shall be entitled at its
option to employ separate counsel for such defense at the expense of
the Indemnified Party. In the event the Indemnifying Party does not
accept the defense of the matter as provided above or in the event that
the Indemnifying Party or its counsel fail to use reasonable care in
maintaining such defense, the Indemnifying Party shall have the full
right to employ counsel for such defense at the expense of the
Indemnifying Party. All parties hereto will cooperate with each other
in the defense of any such action and the relevant records of each
shall be available to the other with respect to such defense.
7 Miscellaneous
-------------
7.1 Successors and Assigns: The terms and conditions of this Agreement
shall inure to thebenefit and be binding upon the respective successors
and assigns of TL and GOCA respectively. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this
Agreement except as expressly provided in the Agreement.
7.2 Governing Law: The laws of the State of Utah shall govern, the fights
and liabilities of the parties to this Agreement and the validity
construction and interpretation thereof
7.3 Counterparts: This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same Instrument.
<PAGE>
7.4 Titles and Subtitles: The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 Notices: Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal
delivery to the party to be notified or upon deposit with the United.
States Post Office, by registered or certified mail postage prepaid and
addressed to the party to be notified at the address indicated for such
party in this Agreement which is incorporated herein by reference, or
at such other address as such party may designate by ten (10) days
advance written notice to the other parties.
7.6 Finders Fee: TL will pay a finders fee in connection with this
transaction TL hereby represents that this fee is the sole
responsibility of TL.
7.7 Expense: Each party shall pay its or his respective costs and expenses
incurred with respect to the negotiation, execution, delivery and
performance of this Agreement.
7.8 Joint and Several Liability: Whenever any party undertakes any joint
and several covenant, agreement, representation, warranty, waiver
and/or other obligation under this agreement, the breach by any party
to the joint and several undertaking shall be deemed to be a breach by
all parties to the undertaking and any party aggrieved by any such
breach way proceed at its sole and absolute discretion against any one
or more or all of the parties bound by that joint and several
undertaking.
7.9 Amendments and Waivers: Any term of this Agreement may be amended and
the observance of any terms of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the parties hereto,
7.10 Severability: If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
7.11 Review by Independent Counsel: each party, by its signature below, has
had the opportunity to have this Agreement reviewed by their own
counsel with any comments, recommendations or proposed changes by
counsel either incorporated herein or waived.
Tide Lines, LLC.
(A Nevada Limited Liability Company)
By: /s/ Michael J. Daniel
----------------------
Michael J. Daniel, President
Go Call Inc.
(A Delaware Corporation)
By: /s/ Michael Ruge
----------------
Michael Ruge, CEO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 124,807
<SECURITIES> 0
<RECEIVABLES> 353,747
<ALLOWANCES> 0
<INVENTORY> 3,608
<CURRENT-ASSETS> 654,608
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,424,131
<CURRENT-LIABILITIES> 281,267
<BONDS> 0
0
0
<COMMON> 6,231,326
<OTHER-SE> (3,037,365)
<TOTAL-LIABILITY-AND-EQUITY> 4,424,131
<SALES> 967,299
<TOTAL-REVENUES> 1,012,278
<CGS> 0
<TOTAL-COSTS> 1,424,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,448
<INCOME-PRETAX> (415,039)
<INCOME-TAX> 0
<INCOME-CONTINUING> (415,039)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (415,039)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
