<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER: 000-25003
REVENGE MARINE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 36-3051776
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
2051 NW 11TH STREET
MIAMI, FLORIDA 33125
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(305) 643-0334, EXT. 127
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of voting and non-voting common equity of
the registrant held by non-affiliates of the registrant, as of June 30, 1999,
was $1,481,500.
Number of shares of Common Stock, $.001 par value, outstanding as of
June 30, 1999: 10,898,810.
DOCUMENTS INCORPORATED BY REFERENCE:
Exhibit list begins on page ___
===============================================================================
<PAGE> 2
Part I
Item 1. Business
COMPANY HISTORY
Revenge Marine, Inc., a Nevada corporation ("Revenge" or the
"Company") was originally incorporated as a Nevada Corporation in December,
1979 as Contracap, Inc. Revenge then changed its name several times. In
November, 1994, Revenge changed its name to Global Energy Organization
Corporation. In January, 1998, Global Energy Organization Corporation entered
into a stock exchange agreement with Revenge Marine, Inc., (formerly Revenge
Yachts, Inc.), an Oklahoma corporation subsequent to which Global Energy
Organization Corporation changed its name to Revenge Marine, Inc. Prior to
January, 1998, neither Revenge Yachts, Inc. nor Global Energy Organization
Corporation had any significant assets. Prior to January, 1998, Revenge had not
engaged in significant activity involving the Yachting or Marine Industries. In
January, 1998, Revenge restated its purpose as providing consulting services
and investment opportunities in the Yachting and Marine industries.
Revenge began a strategy of identification, acquisition and
consolidation of marine industries. In May of 1998 Revenge entered into a stock
exchange agreement with Consolidated Marine, Inc., a Florida Corporation
("Consolidated"), whereby Revenge acquired all of the outstanding stock of
Consolidated in exchange for 636,942 shares of common stock in Revenge.
Consolidated was a custom and production yacht builder, as well as a re-fitter
and repairer of large watercraft. Revenge acquired Consolidated as the first
acquisition in a series of acquisitions of marine manufacturers with the
purpose of creating a leading marine manufacturing, repair and marketing
organization that could serve diverse customer demands and offer a wide-range
of products and services efficiently.
Revenge entered into a stock exchange agreement with Egret Boat
Company, a Florida Corporation ("Egret"), whereby Revenge acquired all the
outstanding stock of Egret in exchange for 955,414 shares of common stock in
Revenge. Egret was a production manufacturer of advanced composite motorized
flats boats of less than 35 feet in length. In August, 1998, 180,692 additional
shares were issued to Egret and Consolidated to complete the combined
transactions and the full payment of the consideration specified in the stock
exchange agreements.
In September, 1998, Revenge entered into an agreement to purchase
Consolidated Yacht Corporation, which contained within it certain assets that
were not included in the Consolidated Marine, Inc. acquisition, but which added
refurbishing, repair and production capability to what had been acquired in the
Consolidated Marine, Inc.
acquisition.
In October of 1998, Revenge incorporated Revenge Marine, Inc., a
Delaware corporation ("Revenge Delaware"). At the time of its incorporation,
Revenge Delaware was not intended to be a wholly-owned subsidiary. It was
intended that stock from Revenge Delaware be issued to shareholders of Revenge
in exchange for the marine assets of Revenge which were to be vended into
Revenge Delaware under an asset purchase agreement. Revenge then intended, once
the divestiture of its marine holdings was complete, to merge with a
telecommunications corporation. However, no aspect of this transaction was ever
consummated in any fashion. For the reasons stated in this paragraph, certain
of the commitments of Revenge, to Finova Capital Corporation and Detroit Diesel
Corporation, were issued jointly from Revenge and Revenge Delaware or just from
Revenge Delaware. Revenge Delaware assigned all assets and liabilities to
Revenge Nevada and is now a dormant shell.
1
<PAGE> 3
In October of 1998, Revenge had an option to purchase the assets of
Blackfin Yacht Corporation ( the "Blackfin Assets") from Detroit Diesel
Corporation. The option expired. Subsequent to the expiration of the option,
Revenge sold the option to Revenge Delaware for its purchase price, $100,000.
Detroit Diesel honored the expired option and on Friday, October 23, 1998,
Revenge Delaware purchased the Blackfin Assets for a purchase price of
$1,005,445 in cash and 545,455 warrants to acquire Revenge common stock
exercisable at an exercise price of $6.44 per share. In addition, Revenge
Delaware granted Blackfin Yacht Corporation a 2% fee of the per unit sale price
for each vessel produced from the Blackfin Assets. Revenge Delaware also
granted certain demand and piggyback registration rights to Blackfin Yacht
Corporation for the warrants issued in the asset purchase. The Blackfin Assets
provided a line of mid-size fiberglass yachts, from 27 to 48 feet. In addition,
there was a dealer network for Blackfin products, which are visually unique and
have a high level of brand identification. The completion of the three
acquisitions outlined above and the assignment of Revenge Delaware's assets and
liabilities to Revenge Nevada gave Revenge the capability to produce a wide
range of high technology motor yachts and motor boats, ranging from 110 foot
custom yachts to 16 foot flats boats.
Consistent with its philosophy of acquiring and streamlining
synergistic marine enterprises, Revenge entered into a long-term lease with an
option to purchase on an 8.67 acre marine facility in Miami, Florida in July of
1998. Revenge consolidated its acquisitions and many of its operations in the
Miami facility and therefore felt itself positioned to take advantage of
economies of scale, improved production efficiencies and elimination of
redundancies. In addition to the Miami facility, Revenge maintained a facility
in Dania, Florida. Revenge continued to identify and explore other marine
acquisitions that were consistent with its objectives.
In February of 1999, in an effort to further streamline operations,
Revenge closed its facility in Dania and consolidated its operations in the
Miami facility. It was hoped that this move would lower operating costs and
allow Revenge to begin to operate its Blackfin and Egret manufacturing
facilities profitably, while utilizing the extensive capacity of the Miami
facility to significantly increase the volume of repair and refurbishing of
yachts being done by its Consolidated Marine division.
In December of 1998, Revenge became aware that South Florida Yacht
Sales and Harbor Yacht Sales were not going to provide sufficient dealer
organization and resources to promote the Revenge products. Therefore, Revenge
began seeking candidates to act as dealers for its products. Consistent with
its long term vision of consolidation in the marine industry, the decision was
made to acquire a network of existing dealerships in order to stabilize the
revenue stream of Revenge, to diversify the outlets for its products and to
capture the additional margin normally retained by retail dealers from sales of
Revenge products.
On February 11, 1999, Revenge entered into an agreement and plan of
reorganization (the "Merger Agreement") with First Chance Marine Finance, Inc.,
a corporation organized under the laws of the State of Florida ("First
Chance"), and First Chance Marine Finance Acquisition, Inc., a corporation
organized under the laws of the State of Delaware ("Merger Sub") and a direct
wholly owned subsidiary of Revenge. Pursuant to the Merger Agreement, (i)
Merger Sub was to be merged (the "Merger") with and into First Chance and First
Chance was to become a wholly owned subsidiary of Revenge, and(ii) each issued
and outstanding share of capital stock of First Chance would be converted into
the right to receive shares of common stock, par value $.001 per share, of
Revenge ("Revenge Common Stock")or shares of preferred Stock of Revenge
("Revenge Preferred Stock"), par value $.001 per share, upon the terms set
forth in the Merger Agreement. A total of approximately 9,363,693 shares of
2
<PAGE> 4
Revenge Common Stock or Revenge Preferred Stock convertible into Revenge Common
Stock were to be issued to former holders of capital stock of First Chance
pursuant to the Merger. The Merger was concluded on March 16, 1999. However, no
integration of First Chance and Revenge ever took place and the companies were
operated as separate entities. It was the intention of Revenge that the
combined companies would engage an underwriter to conduct a secondary offering
of convertible preferred or common stock of Revenge in the range of $10,000,000
and that this sum would be used to develop and implement a marketing strategy
for the Internet, to fund the expansion of a more robust retail network, to
target, initiate and consummate other strategic acquisitions, to retire its
$2.1 million dollar indebtedness from Finova Capital Corporation, to service
approximately $750,000 in accounts payable and to make substantial capital and
infrastructure improvements.
At the time of the Merger, Revenge was experiencing severe liquidity
problems and had difficulty remaining current in its financial obligations. The
principals of First Chance had committed to a best efforts interim financing of
$2 to $3 million dollars and an initial capital contribution to Revenge of
$1,000,000, $666,666 of which was to be used to fund the marine operations of
Revenge. Only $450,000 of these funds were ever delivered and First Chance was
unable to procure any interim financing for the combined companies. In
addition, the underwriter which was to complete the secondary offering
indicated in April of 1999 that they were no longer interested in providing any
assistance to the combined companies. The board of directors of Revenge
concluded in May of 1999 that the rescission of the merger would be in the best
interests of the shareholders of Revenge.
On June 4, 1999, Revenge entered into an agreement to rescind an
attempted merger with First Chance Marine Finance, Inc. ("First Chance"), a
Florida corporation. Pursuant to this agreement, Revenge issued a total of
1,696,000 shares of its common stock, valued at $1,450,000 to First Chance and
its associates. First Chance, which had previously advanced Revenge $450,000 in
cash, issued 500,000 shares of its common stock, valued at $1,000,000 to
Revenge. The 500,000 shares issued to Revenge equate to approximately 7% of
First Chance's total outstanding common stock at June 30, 1999.
Revenge had been approved in the winter of 1998 for an Industrial
Revenue Bond issue for approximately $9,000,000 from Miami-Dade County, subject
to Revenge's ability to find credit enhancement for the bond issue. Revenge
attempted to find such credit enhancement, but was unsuccessful. Without the
bond proceeds, without any interim financing proceeds, with insufficient sales
of its marine products and with less than anticipated revenue from service and
repair, Revenge was unable to meet many of its obligations. In July of 1999,
Revenge was no longer able to service the lease payments for the Miami
facility. Although Revenge's payments to Finova were on an interest only basis
through June 30, 1999, Revenge was unable to resume either principal or
interest payments to Finova and the Finova loan was accelerated in July of
1999.
In June 1999, Revenge resolved to discontinue its marine operations
and to sell substantially all of its assets. The assets were disposed of
through the rescission of the Consolidated Yacht Corporation ("CYC")
acquisition and through two cash sales totaling $2,200,000 in August 1999.
Virtually all of the marine assets were disposed of during these sales and
Revenge was left with 500,000 shares of common stock in First Chance as its
only significant asset.
3
<PAGE> 5
In August of 1999, the Board of Directors and officers of Revenge
resigned, with the exception of President and director William C. Robinson. As
of September, 1999, Revenge had no full-time employees other than Mr. Robinson.
Mr. Robinson is presently engaged in settling the previous payable obligations
of the marine operations of Revenge.
On August 24, 1999, Revenge entered into a letter of intent
("LOI") with Reel Fishing Corporation ("Reelfishing"), a Delaware corporation,
concerning a merger between Revenge and Reelfishing. Under the terms of the
LOI, Revenge would acquire all of the issued and outstanding shares of
Reelfishing in exchange for (1) a loan of $250,000 and (2) 65% of the capital
stock of Revenge. There were a number of conditions to the merger, including
the funding of a loan of $250,000 from Revenge to Reelfishing. Under the LOI,
Revenge was to have made the loan to Reelfishing on or before September 7,
1999. This transaction has been abandoned by the parties and will not proceed.
Revenge now intends to concentrate its efforts on the Internet and
information technology sectors of the marine and other recreational products
industries. The long term plan of Revenge is to leverage international
relationships with marine entities and with existing marine manufacturers to
create a business to business e-commerce internet site for the marine industry
and a related site for consumers and sport fishing enthusiasts. Revenge is
actively seeking acquisition candidates in the marine and recreational products
industries who have a desire to enhance the internet presence of their
businesses. Revenge is actively involved in negotiating joint venture and
collaboration agreements with high profile web design companies, e-fulfillment
and e-shipping concerns and other entities involved in the internet commerce
industry.
(a) Financial Information about Industry Segments
Revenge derived 100% of its revenue and sustained 100% of its loss in the
marine industry segment. Reference is made to the consolidated financial
statements included in this report on Form 10-K.
COMPETITION
As Revenge is no longer competing in the marine manufacturing
industry, information relevant to competition for Revenge now relates only to
the intended information technology, internet related opportunities that
Revenge is currently pursuing. The information technology services and internet
industry is intensely competitive and Revenge's management believes competition
will intensify in the future.
If Revenge is able to become an independent provider of internet
website features, e-commerce capability and business to business marketing
assistance to marine and recreational product industry segments, Revenge will
compete with companies which can provide a combination of product procurement
and services such as existing marine manufacturers with internet capabilities
as well as sophisticated competitors in the internet and e-commerce site
development and maintenance industry. The principal competitive factors in the
Revenge's new industry include the breath, quality and consistency of service
offerings; website design, strategic relationships, working capital, marketing
effectiveness, pricing; and expertise and size of technical, graphic, computer
programming and systems integration and information technolgy workforces.
OTHER COMPETITORS
Boating.com, Yachting.com, the dupontregistry.com, boatstore.com,
powerboats.com and fishing.com compete in the segment that Revenge intends to
enter. These are established websites whose infrastructure has already been
built and who have already built significant relationships with resellers and
manufacturers. There are significant barriers to entry for Revenge in competing
with well-financed, established marine e-commerce sites.
4
<PAGE> 6
Most of Revenge's competitors have greater financial, technical and
marketing resources and have in-country operations to service international
customers. As a result, such companies may be able to respond more quickly to
new or emerging technologies and changes in customer needs or devote more
resources to the development, promotion and sales of their services than the
Company. In addition, competition could result in price decreases and depress
gross profit margins in the industry. Further declines in Revenge's gross
margins may exacerbate the impact of fluctuating net revenues and operating
costs on Revenge's operating results and have a material adverse effect on
Revenge's business, operating results and financial condition.
SERVICES
Revenge is not presently providing any services, though it hopes to
establish itself as a source for members of the marine and recreational
products industries who want access to the internet and the potential exposure
that a well-designed, well-integrated web presence can project.
Like US WEB/CKS, the number one provider of websites and turnkey web
solutions to the Fortune 500, Revenge intends to acquire existing web
developers in the marine and recreational products industry to establish a
competitive position quickly and without difficulty.
Outsourcing Web Services. Outsourcing -- or hiring outside experts to
manage web development, procurement, e-commerce, internet marketing, website
hosting and other information technology functions -- is becoming more common
among enterprises worldwide. Yet Revenge believes there is a significant
opportunity to provide this web outsourcing to the marine and recreational
products industries, which tend traditionally to have weak information
technology staffs. Revenge hopes to provide customers with Outsourcing Services
generally under long term contracts, allowing a stable stream of revenue and a
base of relationships in the marine and recreational products industries that
will add value to new clients. Internet Outsourcing Services are typically
provided through a mixture of on-site and centrally managed resources. Revenge
can be the central manager of marine industries web projects and presence.
Revenge believes that the fragmentation in the marine industry and lack of
effective trade groups and marketing strategies leaves a central web
development out source as well as a central marine portal desirable for a wide
range of industry consumers. However, Revenge anticipates that it will incur
significant initial costs consisting of both personnel costs and capital
expenditures in developing this plan.
Recreational Products Superportal
Revenge intends to use the webhosting, web development and information
technology outsourcing relationships that it will develop to add substance and
connectivity to its planned recreational super portal. Each of the
relationships that Revenge establishes with marine industry companies who wish
to take advantage of the web will also provide a content relationship for the
umbrella recreational superportal. Revenge will derive revenue from this super
portal through advertising and e-commerce revenue.
Consulting Services
Revenge intends to provide customers with analysis,
design, implementation, integration and optimization services on a
project-by-project basis, covering all potential internet needs of its
customers. These services might include: (i) design, installation and upgrade
of internet websites and e-commerce sites in the marine industry; (ii)
implementation of messaging and internet/intranet technologies; (iii)
comprehensive support to assist customers with their web hosting, updating,
order fulfillment needs, systems, network-based applications and connectivity;
(iv) design and installation of network, systems and enterprise management
solutions for the marine and recreational products industry.
5
<PAGE> 7
TRAVEL
Revenge intends to develop a fully integrated, comprehensive
recreational travel, yacht charter and vacation website which will offer
compelling content, commerce and community for the recreational traveler.
Revenge seeks to become a leading on-line community for recreational
travelers and vacationers worldwide by offering consumers superior content and
the largest database of vacation products on the Internet. Revenge intends to
focus on the sale of vacation travel packages involving recreation, sports
fishing, boating and golf, which offer higher gross margins than airfare, hotel
and car rental reservations individually. Of course, Revenge also intends to
offer our customers the ability to purchase individual airline tickets and make
hotel and rental car reservations, through a value-added, entertainment and
information driven user interface that contains elements currently absent in
most mainstream e-travel sites. Revenge intends to develop a number of
innovative techniques to draw initial visitors to the site, to maintain their
interest and to cause them to return to the site again and again. These
techniques might include television programming, national and in-flight
magazine advertisements, CD ROM mailers, personalized travel club branding
including frequent purchaser/site visitor rewards, a referral program, banner
advertisements, Sunday Travel Auctions, an on-line geography game, travel
related equipment and apparel, video clips and virtual visits, travel tips,
currency exchange rates, an on line travel library, weather forecasts, location
maps and concierge service, fishing tournament information, professional golf
statistics and course evaluations, on-line tee times and yacht charter and
pricing information.
Revenge hopes that by a focus on recreational sports related travel,
Revenge will create a niche market that captures an audience not currently
served by other on-line travel agencies. Most on-line travel sites are simply
airline reservation systems with little in the way of true value added content.
Revenge will create its own branded travel vacation experience, so that a
Revenge vacation tends to have positive brand qualities associated with it due
to our consistently demanding standards from vacation providers, ease of use,
one-stop shopping, competitive prices and exotic, well-packaged destinations
that become synonymous with recreational sports. Rather than a blank screen
offering unstructured and fragmented choices, Revenge will become a trusted
recreational vacation adviser, giving gentle recommendations, providing needed
advice and encouraging, through magazine, television and banner teaser ads,
Revenge's brand identification.
The twenty-four hour nature of the Internet and the easy one-click
design of the Revenge site will allow for and encourage midnight surfing,
"impulse click and buys", and designation as the browser default home page for
boating, recreational sports, golf, active vacation and travel enthusiasts.
Revenge intends to combine this content with strategic acquisitions,
partnerships and a unique, outstanding multi-media campaign, to become a
leading portal for recreational sports travel related consumer products,
featuring sports and boating travel related news and information, travel tips,
chat rooms, on-line auctions and a robust e-commerce marketplace for travel
related equipment, merchandise, apparel, and accessories. Revenge hopes to
build a website which functions as a place where sportsmen, fishermen, golfers,
travelers and travel enthusiasts can interact, explore compelling and relevant
content, and shop. The recreational sports traveler and sports vacation
community represents one of the most appealing demographic groups on the world
wide web in terms of income and purchasing power. This community drives our
recreational sports and boating travel revenue growth and positions us to be a
leading channel for marketers, merchants, and advertisers that are increasingly
looking to the Internet to reach our demographic database.
OPERATIONS
Presently, Revenge has very little in the way of current operations.
Although there are significant plans to establish an operating
internet/e-commerce entity, these plans have not yet been executed and the
right merger or acquisition match has not yet been found to fulfill the Revenge
Marine operational vision.
PRICING OF SERVICES
Revenge has not yet determined how it might price its services.
6
<PAGE> 8
SALES AND MARKETING
Revenge intends to target its marketing efforts primarily at senior
level executive, financial and information management personnel in the marine
and recreational products industries.
Revenge intends to pursue a strategy of building alliances, joint
ventures, content swapping deals and strategic collaborations with the most
prominent providers, portals, designers and auction sites on the Internet.
VENDOR RELATIONSHIPS
Presently, Revenge believes that its relationships with vendors and
suppliers in the marine industry are rather strained due to the lack of working
capital and outstanding commitments that Revenge has to its previous vendors.
However, Revenge is presently engaged in rectifying this situation and believes
that the personal relationships of its President, William C. Robinson, in the
internet and recreational products industries will help to establish Revenge's
position as an independent provider of internet Design, integration management
services as well as the operation of its marine and recreational products
superportals.
Employees
As of June 30, 1999, the Revenge had approximately 18 full time
employees. Presently, however, Revenge has one full-time employee, its
President, William C. Robinson. However, as soon as Revenge has concluded its
negotiations with its previous marine vendors, Revenge intends to actively
recruit veterans of the internet, marine and recreational products industries
to assist in the development of the Revenge internet strategy. It is
anticipated that a significant number of these employees will be hired by means
of a merger or acquisition.
Of course, the high technology nature of the Revenge's contemplated
business requires the recruiting and training of a significant number of
qualified technical personnel. Revenge will have to rapidly hire a significant
number of technical personnel to staff projects at customer sites, on the
marine and recreational superportals and support e-commerce fulfillment and
marketing. Competition for qualified technical and sales personnel is intense,
as Revenge competes with other service providers, as well as with its own
customers. The growth of the internet has created a premium for a computer
skilled workforce.
Revenge's voluntary employee turnover for Fiscal 1999 is difficult to
estimate as Revenge dismissed its full-time employees due to financial
difficulties. Management estimates that the voluntary employee turnover was
less than 10%.
REORGANIZATION AND DIVESTITURE
GLOBAL ENERGY ORGANIZATION CORPORATION
In January 1998, Revenge Marine, Inc. (formerly Revenge Yachts, Inc.),
an Oklahoma corporation, executed a Stock Exchange Agreement (the "Agreement")
with Global Energy Organization Corporation ("Global"), a publicly traded
Nevada corporation, which had been inactive for the previous five years.
Pursuant to the Agreement dated January 23, 1998, Global issued
3,240,000 shares of its $.001 par value common stock in exchange for 100% of
the issued and outstanding common stock of Revenge Marine, Inc. As a result of
this "reverse acquisition", Revenge Marine, Inc. became a wholly owned
subsidiary of Global. In accordance with the terms of the agreement, Global
(the Nevada parent) adopted the name "Revenge Marine, Inc."
7
<PAGE> 9
BYC ACQUISITION CORPORATION
Under an agreement dated October 22, 1998, Revenge purchased
substantially all of the assets and certain liabilities of BYC Acquisition
Corporation ("BYC"), a Delaware corporation. In consideration of the transfer
of assets and liabilities, Revenge paid $1,005,455 in cash and issued a warrant
entitling BYC to purchase up to 545,455 shares of Revenge's common stock at an
exercise price of $6.44 per share at any time through October 22, 2001. The
agreement also called for Revenge to pay a 2% of sales price fee on all
Blackfin sales to BYC for a period of three years from the agreement date. The
assets acquired consist primarily of boat molds and shop equipment.
The purchase agreement was terminated pursuant to a replacement
agreement dated June 30, 1999, whereby all assumed liabilities were paid by the
issuance of preferred shares to BYC, the stock warrant was returned to Revenge,
and Revenge's obligation for any accrued fees on Blackfin sales was terminated.
In consideration of the termination of the purchase agreement, Revenge issued
to BYC 1,206 shares of its Series B Cumulative Convertible Preferred Stock and
issued a warrant to purchase up to 1,500,000 shares of Revenge's common stock
at an exercise price of $0.37 per share. Further, Revenge is obligated to pay
BYC a fee equal to 1% of its total revenues from all sources for the period
from April 1, 1999 to April 30, 2002.
CONSOLIDATED YACHT CORPORATION, INC.
On September 8, 1998, Revenge purchased substantially all of the
assets of Consolidated Yacht Corporation, Inc. ("CYC") in exchange for a
promissory note in the amount of $458,162. The president of CYC was a related
party to Revenge as further disclosed in Note 7.
The purchase agreement was terminated by means of a rescission
agreement dated June 30, 1999. The rescission agreement called for the return
of all purchased assets, the cancellation of the promissory note, and the
immediate vesting of stock options held by the president of CYC.
Further, an automobile was transferred to CYC in exchange for monies
advanced to Revenge by CYC's president. CYC's president returned 895,333 shares
of stock to Revenge, which had been issued to him pursuant to Revenge's
acquisition of Egret Boat Company and Consolidated Marine (see following
disclosures). CYC will assume the lease on Revenge's operating facility. In an
amendment to the original agreement which was signed on October 18th allowed Jim
Gardiner, Consolidated's owner to keep the originally canceled shares for the
assumption of $175,000 in debt and all liabilities related to the Miami
Facility.
8
<PAGE> 10
FIRST CHANCE MARINE FINANCE, INC.
On June 4, 1999, Revenge entered into an agreement to rescind an
attempted merger with First Chance Marine Finance, Inc. ("First Chance"), a
Florida corporation. Pursuant to this agreement, Revenge issued a total of
1,696,000 shares of its common stock, valued at $1,450,000 to First Chance and
its associates. First Chance, which had previously advanced Revenge $450,000 in
cash, issued 500,000 of its common stock, valued at $1,000,000 to Revenge. The
500,000 shares issued to Revenge equate to approximately 7% of First Chance's
total outstanding common stock at June 30, 1999.
EGRET BOAT COMPANY, INC.
Pursuant to a stock exchange agreement dated May 21, 1998, Revenge
issued 955,414 shares of its common stock, valued at $1,500,000, in exchange
for all of the outstanding shares of Egret Boat Company, Inc., a Florida
corporation. The acquisition was accounted for as a purchase and, accordingly,
the results of operations of the acquired business and the fair market values
of the acquired assets and liabilities are included with consolidated
operations from the date of acquisition. The purchase price was allocated as
follows:
Property and equipment $ 117,547
Working capital, net 20,061
Other intangible assets 1,362,392
----------
Total $1,500,000
==========
CONSOLIDATED MARINE, INC.
Pursuant to a stock exchange agreement dated May 27, 1998, Revenge
issued 636,942 shares of its common stock, valued at $1,000,000 in exchange for
all of the outstanding common shares of Consolidated Marine, Inc. (CMI), a
Florida corporation. The acquisition was accounted for as a purchase and,
accordingly, the results of operations of the acquired business and the fair
market values of the acquired assets and liabilities are included with
consolidated operations from the date of acquisition. In August 1998, the
purchase price was renegotiated and an additional 180,692 shares of Revenge
stock valued at $237,068 were issued to CMI. The revised purchase price was
allocated as follows:
Organization costs $ 500
Other intangible assets 1,236,568
----------
Total $1,237,068
==========
BUSINESS FACTORS
Investors should carefully consider all of the information contained
herein, including the following business factors. In addition, this Form 10-K
contains certain forward looking statements and trend analysis based on current
expectations. Actual results may differ materially due to a number of factors,
including those set forth below.
9
<PAGE> 11
High Degree of Leverage; No working Capital; No Employees; No Facilities; Future
Capital Needs
As of June 30, 1999, after giving effect to the cash sales of the
marine assets, the application of the net proceeds there from, Revenge had
outstanding indebtedness of approximately $1.1 million. Management is currently
in the process of settling for equity the majority of this debt. However, there
can be no assurance that this re-negotiation will be successful. This leverage
may have several important consequences for the Revenge, including, but not
limited to, the following: (i) Revenge's ability to obtain additional financing
in the future for working capital, acquisitions, capital expenditures, general
corporate or other requirements may be limited or impaired; (ii) a substantial
portion of Revenge's cash flow from operations will be dedicated to servicing
its indebtedness; and (iii) Revenge's ability to withstand competitive
pressures or adverse economic conditions, and to take advantage of future
business opportunities that may arise, may be negatively affected. The
Company's inability to service its indebtedness or obtain additional financing,
as needed, on favorable terms would have a material adverse effect on the
Company's business, operating results and financial condition.
Fluctuations in Operating Results
Revenge's operating results have varied in the past, and Revenge
expects its operating results to continue to fluctuate. Revenge's net revenues
may fluctuate due to a variety of factors, including the success of Revenge at
attracting new investment and new customers, the rate at which Revenge hires
new employees, the amount Revenge is required to spend on development of its
super portals and the amount of indebtedness Revenge is able to settle for
equity. Once Revenge's internet operations commence, Revenge's operating
results may be especially sensitive to changes in the margin mix of services
sold and the level of its operating expenses. Revenge's operating expenses may
fluctuate as a result of numerous factors, including the timing and rate of new
employee hiring, the utilization rate of service personnel and competitive
conditions. Revenge's costs are unknown in the near term, and Revenge may be
unable to adjust spending in a timely manner to compensate for an unexpected
revenue shortfall. As a result, revenue shortfalls may have an immediate and
disproportionate adverse effect on operating results. In addition, if Revenge
spends to build its capabilities to support higher revenue levels, Revenge's
near term operating results will suffer until it achieves its revenue goals.
Due to all of these factors, Revenge believes that its operating results are
likely to vary.
Intense Competition
Boating.com, Yachting.com, the dupontregistry.com, boatstore.com,
powerboats.com and fishing.com compete in the segment that Revenge intends to
enter. These are established websites whose infrastructure has already been
built and who have already built significant relationships with resellers and
manufacturers. There are significant barriers to entry for Revenge in competing
with well-financed, established marine e-commerce sites.
10
<PAGE> 12
Most of Revenge's competitors have greater financial, technical and
marketing resources and have in-country operations to service international
customers. As a result, such companies may be able to respond more quickly to
new or emerging technologies and changes in customer needs or devote more
resources to the development, promotion and sales of their services than the
Company. In addition, competition could result in price decreases and depress
gross profit margins in the industry. Further declines in Revenge's gross
margins may exacerbate the impact of fluctuating net revenues and operating
costs on Revenge's operating results and have a material adverse effect on
Revenge's business, operating results and financial condition.
Need to Recruit and Retain Management, Technical and Sales Personnel
Revenge believes that its future success depends, to a large extent,
upon the efforts and abilities of its executive officers, managers,
technical and sales personnel which it intends to hire shortly. Failure by
Revenge to attract and train skilled managers, technical and sales personnel on
a timely basis, or the inability of Revenge to attract such personnel, could
materially adversely affect Revenge's business, operating results and financial
condition.
Control by Principal Stockholders
The President of Revenge, William C. Robinson and his family and
trusts related to his family beneficially own substantially in excess of a
majority of the outstanding shares of common stock, $.001 par value, of Revenge
(the "Common Stock"). As a result, Mr. Robinson is able to control the election
of members of Revenge's Board of Directors and generally exercise control over
Revenge's corporate actions.
Year 2000 Readiness
Revenge intends to use a significant number of computer software
programs and operating systems in its internal operations, including
applications used in internet web design, web hosting and financial business
systems and various administration functions. As the Year 2000 approaches, each
of these computer systems may be affected in some way by the rollover of the
two-digit year value to "00". If these systems are unable to properly recognize
date sensitive information when the year changes to 2000, they could generate
erroneous data or fail. Revenge intends to utilize both internal and external
resources to identify, correct or reprogram, and test the systems for Year 2000
compliance.
Revenge intends to classify its Year 2000 project into five phases:
inventory, assessment, renovation, validation and implementation. Inventory is
the process in which all electronic/computer components are defined for all
systems (information technology and non-information technology). Assessment is
the process in which all components are classified as either "Y2K-ready" or
not. Renovation is the process in which systems undergo necessary upgrades or
replacements or are retired. Validation is the process in which renovated
systems are tested within Revenge's infrastructure to validate that either the
11
<PAGE> 13
readiness assessment is correct or that the renovated system or component can
be integrated without causing or being affected by a Year 2000 impact.
Implementation is the process in which a prepared system is installed into the
Company's production environment and is utilized to support business
operations.
Revenge has not yet completed any of the above steps and may not be
able to do so before December 31, 1999. Revenge has no basis, since its
information technology operations have not yet commenced, of what it will spend
on Year 2000 remediation.
In addition to intending to upgrade its own systems, Revenge intends to
contact certain significant customers and suppliers to determine their Year 2000
readiness profile if there are customers and suppliers in time to make such an
inquiry relevant.
All potential risks and uncertainties associated with the Year 2000
issue cannot be fully and accurately quantified. Contingency plans will be
developed if third party data interchange partners fail compliance testing or
if the replacement or renovation of other existing systems is not on schedule.
Although Revenge does not believe that any additional costs or potential loss
in revenue associated with Year 2000 readiness initiatives will have a material
adverse effect on Revenge's business, operating results or financial condition,
there can be no assurance that the costs associated with updating software or
recovering from potential systems interruptions would not have a material
adverse effect on Revenge's business, operating results and financial
condition.
Risk Factors Related to Revenge's Internet Plan
Revenge intends to launch its web site in December, 1999. Revenge has
virtually no operating history in the Internet, e-commerce or travel industries
available to evaluate its business and prospects. There are many risks,
expenses and uncertainties that may be encountered by development stage
companies, particularly in the new and emerging Internet market:
o An evolving and unproven business model;
o Management of an expanding business in a rapidly changing market;
o Attract new customers and maintain customer satisfaction;
o Introduce new and enhanced sites, services, products, content, and
alliances;
o Maintain its profit margins notwithstanding price competition or
rising wholesale prices; and
o Minimize technical difficulties, system downtime and the effect of
Internet brownouts.
To address these risks Revenge must successfully:
o Develop and extend relationships with manufacturers for merchandise;
o Develop its web site into a web "community";
o Develop alliances with celebrities and parties in the recreational
products business to provide web site content;
o Implement an evolving and unproven business model;
o Establish internal accounting systems and controls;
o Manage growth; if any;
o Develop and manage an efficient distribution system;
o Develop and implement an efficient transaction processing system;
and
12
<PAGE> 14
o Successfully develop and market its new web site.
If Revenge does not successfully manage these risks, its business will
suffer. Revenge cannot assure that it will successfully address these risks or
that its business strategy will be successful.
REVENGE HAS INCURRED LOSSES AND EXPECTS TO INCUR SUBSTANTIAL LOSSES
FOR THE FORESEEABLE FUTURE.
Since inception, Revenge has been operating at a loss for virtually
all periods since its inception. Revenge expects that operating losses and
negative cash flow will continue for the foreseeable future as Revenge must
invest in marketing and promotional activities, technology and operating
systems in order to change its revenue model from manufacturing to service
related industries. Revenge believes that increasing its revenues will depend
in large part on its ability to:
o Develop and increase consumer awareness of its online community and
develop effective marketing and other promotional activities to
drive traffic to its web site;
o Generate advertising revenues from its online community;
o Develop and Enhance its online travel agency, on-line store,
transaction-processing systems and network infrastructure to support
increased traffic;
o Provide its customers with quality content and e-commerce
experiences; and
o Develop strategic relationships.
Revenge's future profitability depends on generating and sustaining
high revenue growth while maintaining reasonable expense levels. Slower revenue
growth than Revenge anticipates or operating expenses that exceed its
expectations would harm its business. If Revenge achieves profitability,
Revenge cannot be certain that Revenge would be able to sustain or increase
profitability in the future. Revenge cannot be certain when or if it will
achieve sufficient revenues in relation to expenses to become profitable
REVENGE WILL NEED ADDITIONAL CAPITAL TO FUND ITS BUSINESS.
Revenge requires substantial working capital to fund its new business
ventures into the internet and recreational products service industry and may
need more in the future. Revenge will likely experience negative cash flow from
operations for the foreseeable future. Revenge does not presently have
sufficient working capital to implement its on-line strategy and there can be
no assurance that such capital will be forthcoming on terms that Revenge will
find acceptable. Revenge needs to raise additional funds through the issuance
of equity, equity-related or debt securities and therefore the current
shareholders' stock ownership percentage will be diluted. If Revenge is unable
to obtain adequate additional financing on reasonable terms, its operations may
never commence and Revenge may never become profitable. Revenge cannot be
certain that additional financing will be available.
REVENGE MAY BE UNABLE DEVELOP A COMPELLING WEBSITE OR SUPPORT THE
VOLUME ON ITS WEB SITE.
A key element of Revenge's strategy is to develop a website which will
generate a high volume of traffic However, if Revenge is successful in creating
such a site, growth in the number of users of its online community may strain
or exceed the capacity of its computer systems and lead to declines in
performance or systems failure. Revenge has no present systems and is not
certain if it will be able to acquire adequate capacity to accommodate rapid
growth in user demand. Revenge will therefore need to add hardware and software
and to develop and after development, to improve and enhance the functionality
and performance of its community, e-commerce, customer tracking and other
technical systems. Revenge intends to develop on-line systems and implement new
systems as Revenge anticipates new demand. Failure to implement these systems
effectively or within a reasonable period of time would result in a failure of
Revenge's on-line strategy.
Revenge must also introduce additional or enhanced features and
services to attract and retain customers to its web site. If a new service is
not favorably received, its customers may visit its web site less frequently.
These new services or features may not function well, and Revenge may need to
13
<PAGE> 15
modify the design of these services significantly to correct errors. If users
encounter difficulty with or do not accept its services or features, its
business, operating results and financial condition would be adversely
affected.
REVENGE NEEDS TO ATTRACT, RETAIN AND MOTIVATE SKILLED PERSONNEL AND
RETAIN ITS KEY PERSONNEL IN ORDER FOR ITS BUSINESS TO SUCCEED.
Its ability to develop and maintain its web site and other necessary
systems depends on its ability to attract, retain and motivate highly skilled
technical, managerial and marketing personnel. Competition for skilled software
engineers has greatly increased with the emergence of a number of internet
retailers and other electronic commerce developments. If Revenge is unable to
attract and retain the necessary personnel, its web site and other systems may
not operate efficiently. These difficulties could materially and adversely
affect its business and results of operations.
REVENGE'S BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH COMPETITION IN
THE MARKETPLACE.
Revenge can make no assurance that Revenge will be able to compete
successfully or that competitive pressures will not damage its business. Its
competition includes:
o Web sites maintained by other online retailers of recreational
sports, boating and travel products;
o Other retailers offering products comparable to those being sold by
Revenge; and
o Internet portals and on-line service providers that feature travel
and recreation, such as Expedia, Preview Travel, Travelocity,
Cheaptickets.com and Priceline.
Revenge's competitors are larger than Revenge and have substantially
greater financial, distribution and marketing resources. In addition, its
competitors may be able to secure products, including airfare, resort
accommodations and tour packages from vendors on more favorable terms, fulfill
customer orders more efficiently and adopt more aggressive pricing or inventory
availability policies than Revenge can. Traditional store-based retailers also
enable customers to see products in a manner that is not possible over the
Internet. Some online competitors may be able to use the Internet as a
marketing medium to reach significant numbers of potential customers more
effectively than Revenge can.
REVENGE MAY HAVE DIFFICULTY OBTAINING CONTENT AND MERCHANDISE.
Revenge wants to offer content to its customers to develop an Internet
community. There can be no assurance that Revenge will be able to obtain such
content or that Revenge will develop a viable Internet community. If Revenge is
not able to develop a viable recreational products and travel based web
community, its business, operating results and financial condition may never
improve from the present state of virtual non-operation.
14
<PAGE> 16
GENERAL ECONOMIC CONDITIONS AND DISCRETIONARY CONSUMER SPENDING MAY
AFFECT REVENGE'S PERFORMANCE.
Revenge's operations depend upon a number of factors relating to or
affecting consumer spending for discretionary goods, such as Revenge's
products. Revenge's operations may be adversely affected by unfavorable local,
regional, or national economic developments or by uncertainties regarding
future economic prospects that reduce consumer spending in the markets served
by Revenge. Consumer spending on non-essential goods can also be adversely
affected as a result of declines in consumer confidence levels, even if
prevailing economic conditions are favorable. In an economic downturn, consumer
discretionary spending levels generally decline, often resulting in
disproportionately large reductions in the purchase of discretionary goods.
There can be no assurance that Revenge's results of operations would not be
significantly adversely affected during any such period of adverse economic
conditions or low consumer confidence
REVENGE'S BRAND MAY NOT ATTAIN SUFFICIENT RECOGNITION.
Revenge believes that establishing, maintaining and enhancing its
brand is a critical aspect of its efforts to attract and expand its online
traffic. The number of Internet sites that offer competing services and
products increase the importance of establishing and maintaining brand name
recognition. Promotion of its web site will depend largely on its success in
providing a high-quality online experience supported by a high level of
customer service, which cannot be assured. To attract and retain online users,
and to promote and maintain its web site in response to competitive pressures,
Revenge may find it necessary to increase substantially its financial
commitment to creating and maintaining a strong brand loyalty among customers.
This will require significant expenditures on advertising and marketing. If
Revenge were unable to provide high-quality online services or customer
support, or otherwise fails to promote and maintain its web site and online
community, or if Revenge incurs excessive expenses in an attempt to promote and
maintain its web site, its business prospects, operating results and financial
condition would be materially adversely affected.
REVENGE'S BUSINESS DEPENDS ON CONTINUED GROWTH OF ELECTRONIC COMMERCE.
Its future revenues and profits, if any, will depend substantially
upon the acceptance and use of the Internet and other online services as an
effective medium of community and commerce by its target customers. Rapid
growth in the use of and interest in the Internet and online services is a
recent phenomenon. Acceptance and use of the Internet and other online services
may not continue to develop at historical rates and a sufficiently broad base
of consumers may not adopt, and continue to use, the Internet and other online
services as a medium of commerce. Demand and market acceptance for recently
introduced services and products over the Internet are subject to a high level
of uncertainty and there exist few proven services and products. Revenge's
target customer has historically used traditional means of commerce to purchase
recreational sports products, services, travel, vacation packages and related
merchandise and to obtain recreational products, boating, sports and travel
information. For Revenge to be successful, these customers must accept and
utilize its online program to provide them recreational products and
information.
In addition, the Internet may not be accepted as a viable long-term
marketplace for information and products for a number of other reasons beyond
Revenge's control, including potentially inadequate development of the
necessary network infrastructure or delayed development of enabling
technologies and performance improvements. To the extent that the Internet
continues to experience significant expansion in the number of users and
bandwidth growth requirements, the infrastructure for the Internet may be
unable to support the demands placed upon it. In addition, the Internet could
lose its viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity or more sophisticated levels of content (such as streaming video), or
due to increased governmental regulation. Changes in or insufficient
availability of telecommunications services to support the Internet also could
result in slower response times and adversely affect usage of the Internet
generally and its online community in particular.
15
<PAGE> 17
REVENGE MUST KEEP UP WITH RAPID TECHNOLOGICAL CHANGES THAT AFFECT
ELECTRONIC COMMERCE.
To remain competitive, Revenge must continue to enhance and improve
the responsiveness, functionality and features of its online operations. The
Internet and the electronic commerce industry are characterized by:
o Rapid technological change;
o Changes in user and customer requirements and preferences;
o Frequent new product, service, and content introductions embodying
new technologies; and
o The emergence of new industry standards and practices.
The evolving nature of the Internet could render Revenge's intended
online community, technology, and systems obsolete. Its success will depend, in
part, on its ability to:
o License leading technologies useful in its business;
o Develop content, products, and services that appeal to its
customers;
o Develop new services and technology that address the increasingly
sophisticated and varied needs of its customers; and
o Respond to technological advances and emerging industry standards
and practices on a cost-effective and timely basis.
The development of Revenge's web site and other technology entails
significant technical and business risks. Revenge may not use new technologies
effectively or adapt its online community, technology, and
transaction-processing systems to customer requirements or emerging industry
standards. If Revenge were unable, for technical, legal, financial or other
reasons, to adapt in a timely manner, in response to changing market conditions
or customer requirements, its business, financial condition and results of
operations could be seriously harmed.
REVENGE DEPENDS ON THIRD PARTY SHIPPERS, CONTENT SOURCES,
COMMUNICATIONS PROVIDERS AND VENDORS TO OPERATE ITS BUSINESS.
Revenge depends on a number of third parties to deliver goods and
services to Revenge and its customers. For example, Revenge will rely on the
United States Postal Service, United Parcel Service, Federal Express and other
carriers to ship merchandise to its customers. Strikes or other service
interruptions affecting one or more of its shippers could impair its ability to
deliver merchandise on a timely basis.
Revenge will depend on communications providers to provide its
Internet users with access to its online community. Its online community could
experience disruptions or interruptions in service due to failures by these
providers. In addition, its users depend on Internet service providers and web
site operators for access to its online community. Each of these groups has
experienced significant outages in the past and could experience outages,
delays and other difficulties due to system failures unrelated to its systems.
These types of occurrences could cause users to perceive its web site as not
functioning properly and therefore cause them to stop using its services.
Revenge depends on the ability of third-party vendors to provide it
with recreational products, travel and vacation products and related
merchandise at competitive prices and in sufficient quantities. Revenge has no
relationships presently with such suppliers. Revenge may never develop such
relationships. Even if Revenge is successful in developing such relationships,
Revenge's suppliers may have limited resources, production capacities and
operating histories. Revenge's business could be harmed if its ability to
procure products becomes limited.
REVENGE MAY BE SUBJECT TO SALES AND OTHER TAXES.
Revenge may not collect sales or other similar taxes for physical
shipments of goods into states other than the state where its on-line
operations would be based. One or more local, state or foreign jurisdictions
may seek to impose sales tax collection obligations on Revenge. In addition,
any new operation in states outside Revenge's base of operations could subject
Revenge's shipments in such states to state sales taxes under current or future
16
<PAGE> 18
laws. If one or more states or any foreign country successfully asserts that
Revenge should collect sales or other taxes on the sale of its products, the
resulting tax liability could impair Revenge's business. Any such liability
could also include liability for back taxes and penalties, which could cause
significant harm to Revenge's financial condition and may require it to restate
earnings for prior periods.
CONFLICTS OF INTEREST MAY OCCUR IN TRANSACTIONS WITH AFFILIATES.
Revenge may enter into transactions with its affiliates that involve
conflicts of interest. Such arrangements would not be negotiated on an arms'
length basis. While Revenge intends to enter into any future related party
transactions on terms no less favorable than those Revenge could obtain from
unrelated third parties, the interests of directors or officers of Revenge or
holders of more than 5% of its Common Stock, in their individual capacities or
capacities with related third-party entities, may conflict with the interests
of such persons in their capacities with Revenge.
ELECTRONIC COMMERCE IS SUBJECT TO SECURITY RISKS.
A fundamental requirement of electronic commerce and communications is
the secure transmission of confidential information over public networks.
Revenge will rely on encryption and authentication technology licensed from
third parties to provide the security and authentication necessary for secure
transmission of confidential information, such as customer credit card numbers.
In addition, Revenge intends to maintain an extensive confidential database of
customer profiles and transaction information. Advances in computer
capabilities, new discoveries in the field of cryptography, or other events or
developments may result in a compromise or breach of the methods used by
Revenge to protect customer transaction data. If any such compromise of its
security were to occur, it could seriously harm Revenge's reputation, business,
financial condition and results of operations. A party who is able to
circumvent Revenge's security measures could misappropriate proprietary
information or cause interruptions in Revenge's operations.
Revenge may be required to expend significant capital and other
resources to protect against such security breaches or to alleviate problems
caused by such breaches. Concerns over the security of the Internet and other
online transactions and the privacy of users may also inhibit the growth of the
Internet and other online services, especially as a means of conducting
commercial transactions. To the extent that activities of Revenge or
third-party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage its
reputation and expose Revenge to a risk of loss or litigation and possible
liability. Revenge's security measures may not prevent security breaches and
failure to prevent such security breaches may seriously harm its business,
financial condition and results of operations.
Revenge cannot assure that others will not independently develop
substantially equivalent proprietary information and techniques. In addition,
Revenge may be required to obtain licenses to certain intellectual property or
other proprietary rights of third parties. Revenge cannot assure that any such
licenses or proprietary rights would be made available to under acceptable
terms, if at all. If Revenge does not obtain required licenses or proprietary
rights, Revenge could encounter delays in product development or find that the
development or sale of products requiring such licenses could be foreclosed.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES COULD BURDEN ITS
BUSINESS.
The adoption or modification of laws or regulations applicable to the
Internet could harm Revenge's future on-line business. The U.S. Congress
recently passed laws regarding children's online privacy, copyrights and
taxation. The law governing the Internet, however, remains largely unsettled.
New laws may impose burdens on companies conducting business over the Internet.
Although its online transmissions generally originate in California, the
governments of other states or foreign countries might attempt to regulate its
transmissions or levy sales or other taxes relating to its activities. It may
take years to determine whether and how existing laws governing intellectual
17
<PAGE> 19
property, privacy, libel and taxation apply to the Internet and online
advertising. In addition, the growth and development of online commerce may
prompt calls for more stringent consumer protection laws, both in the United
States and abroad. Revenge also may be subject to regulation not specifically
related to the Internet, including laws affecting direct marketers.
ITEM 2. PROPERTIES.
Presently, Revenge does not have significant office facilities or
operational facilities. Revenge is not currently making lease payments on any
facility. Revenge believes that it would be able to occupy a portion of its
former facility on the Miami river rent free by accommodation from former
director James Gardiner, but there can be no assurance that this will take
place. Presently, Revenge's corporate operations, which primarily involve
winding down of its previous manufacturing capacity and pursuing the
development of its on-line strategy, are conducted from the offices of director
William C. Robinson in Tulsa, Oklahoma. Revenge pays no rent for the use of Mr.
Robinson's office facilities.
ITEM 3. LEGAL PROCEEDINGS.
The Company is engaged in legal actions arising in the ordinary course
of business. Revenge believes that these actions could result in no more than
$79,000 in potential liabilities for Revenge.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during Fiscal
1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of June 30, 1999, Revenge had outstanding Common Stock, $0.001 par
value, 50,000,000 shares authorized, 10,898,810 and 6,675,720 shares issued and
outstanding at June 30, 1999 and 1998 respectively.
MARKET PRICE OF COMMON EQUITY
The Company's Common Stock, $.001 par value per share ("Common
Stock")are listed on the National Association of Securities Dealers Over the
Counter Bulletin Board Quotation System ("OTC"). There were approximately 2,546
18
<PAGE> 20
beneficial holders of the Common Stock. The following table sets forth the high
and low closing sale prices of Common Stock, as reported by the OTC, for the
periods indicated.
COMMON STOCK
----------------
1998 HIGH LOW
----- ------
First Quarter .00
Second Quarter .00
Third Quarter 3.063 1.370
Fourth Quarter 2.50 1.031
COMMON STOCK
----------------
1999 HIGH LOW
----- ------
First Quarter 1.75 .50
Second Quarter .75 .125
Third Quarter 1.375 .531
Fourth Quarter 1.062 .437
The Company has never paid dividends on its Common Stock. The Company
has no present plans to pay cash dividends in the foreseeable future and
intends to retain earnings for the future operation and expansion of the
business. Any determination to declare or pay dividends in the future will be
at the discretion of the Company's Board of Directors and will depend on the
Company's results of operations, financial condition, any contractual
restrictions, considerations imposed by applicable law and other factors deemed
relevant by the Board of Directors.
Described below are all sales of securities by the Company during the
fiscal year ended June 30, 1999 that were not registered under the Securities
Act of 1933, as amended (the "1933 Act"). On the issuance of these securities
the Company relied on the exemption from registration under the 1933 Act set
forth in Section 4(2) thereof, based on established criteria for effecting a
private offering, including the number of offerees for each transaction, access
to information regarding the Company, disclosure of information by the Company,
restrictions on resale of the securities offered, investment representations by
the purchasers, and the qualification of offerees as "accredited investors."
In Fiscal 1999, the Company issued 4,223,090 shares of unregistered
common stock in offerings described in part Revenge's previous filings on Form
10Q and Form 10. Certain of these issuances are reproduced below. The
remainder are contained in Revenge's filings on Form 10 and Form 10Q for
issuances during the first three quarters of fiscal year 1999.
1,696,000 shares of common stock were issued in connection with the
merger with First Chance Marine Finance, effective March 16, 1999. Revenge
received $450,000 in cash and 500,000 shares of First Chance common stock in
exchange for the shares of Revenge common at the conclusion of the rescission
of the merger.
In June, 1999, Revenge issued Series B 10% Cumulative Convertible
Preferred Stock, $40 par value, convertible into Common Stock based on a 40%
discount to the bid price as listed on the NASDAQ Bulletin Board on the day of
conversion; authorized 75,000 shares; 17,330 shares issued and 2,718 shares
outstanding at June 30, 1999; liquidation preference equal to the par value of
any outstanding shares plus accrued dividends, if any prior to any
distributions to Common Stock holders.
In January, 1999, Revenge issued 630,590 shares of common stock to
assignees and affiliates of Roy Meadows at a price per share of $0.12. These
shares were issued pursuant to the terms of a convertible debenture which Mr.
Meadows purchased from its original holder.
In January, 1999, Allied Capital Corporation, ("Allied") an affiliate
of Director William C. Robinson, converted $200,000 of debt owed by the
corporation to Allied into 588,235 shares of common stock of Revenge, pursuant
to a resolution adopted by the Board of Directors of Revenge on December 15,
1998, at the then current market price of $0.37 per share.
19
<PAGE> 21
Options and Warrants to Purchase Common Shares of Revenge
In December 1998, the Company adopted its 1998 Incentive Stock Plan
("the Plan") under which 2.8 million options to purchase common stock were
granted to substantially all full-time employees. The options granted under the
Plan extend for 5 years from the date of grant and vest in monthly increments
over a period of up to two years. The exercise price was equal to the stock
price on the grant date. The Plan is considered to be a non-compensatory plan,
as defined by Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation". Accordingly, no compensation cost has been
recognized for the year ended June 30, 1999. The options were issued at per
share exercise prices between $0.34 and $0.37 per share.
In June 1999, the Company issued a warrant to purchase up to 1,500,000
shares of the Company's common stock at an exercise price of $0.37 per share to
Detroit Diesel corporation. The warrant expires June 30, 2002.
In June 1999, the Company issued a warrant to purchase up to 250,000
shares of the Company's common stock at an exercise price of $0.37 per share in
exchange for consulting services relating to the Blackfin Yacht Corporation
asset acquisition to Peter Johnson. The warrant expires June 30, 2002.
In May 1998, the Company granted stock options pursuant to a
consulting agreement to purchase 175,000 shares of common stock at $1.00 per
share, 175,000 shares of common stock at $1.50 per share, and 175,000 shares of
common stock at $2.00 per share to affiliates of Roy Meadows. The options
expire December 31, 2000.
In May 1998, the Company issued a warrant to purchase up to 20,000
shares of the Company's common stock at an exercise price of $1.50 per share as
partial consideration for consulting services.
20
<PAGE> 22
Information with respect to all stock options and warrants is
summarized below:
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------ ----------------
Outstanding at inception -- $ --
Granted 1998 545,000 1.50
---------- -----
Outstanding at June 30, 1998 545,000 1.50
Granted 1999 4,550,000 0.37
---------- -----
Outstanding at June 30, 1999 5,095,000 0.49
========== =====
Options exercisable, June 30, 1998 545,000 1.50
Options exercisable, June 30, 1999 4,373,054 0.51
21
<PAGE> 23
Item 6. Selected Financial Data
The following table sets forth selected historical financial data of
the Company as of the dates and for the periods indicated. The selected
financial data of the Company were derived from the audited consolidated
financial statements included herein. The selected consolidated financial
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and related notes thereto of the Company
appearing elsewhere herein.
Although Regulation S-K, Item 301, indicates that information should
be provided for continuing operations, the Registrant has no continuing
operations at the present time. Therefore, providing a convenient format to
highlight certain significant trends in registrants operations and financial
condition may not be helpful, as the operations are no longer continuing.
Nevertheless, information for discontinued operations is provided below
<TABLE>
<CAPTION>
Item Fiscal 1999 Fiscal 1998
- ---- ----------- -----------
<S> <C> <C>
Loss from Discontinued Operations (3,432,808) (318,932)
Loss on Disposal of Assets from Discontinued Operations (918,047) --
Net Loss (4,350,855) (318,932)
Weighted Average Shares Outstanding 7,129,680 4,325,237
Net Loss From Operations Per Share (0.61) (0.07)
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The following discussion and analysis of the Company's consolidated
financial position and consolidated results of operations should be read in
conjunction with the Company's Selected Consolidated Financial Information
included and the Consolidated Financial Statements and related Notes thereto
included herein.
FORWARD LOOKING STATEMENTS THIS REPORT CONTAINS FORWARD LOOKING
STATEMENTS. ADDITIONAL WRITTEN OR ORAL FORWARD LOOKING STATEMENTS MAY BE MADE
BY THE COMPANY FROM TIME TO TIME IN FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION OR OTHERWISE. SUCH FORWARD LOOKING STATEMENTS ARE WITHIN THE MEANING
OF THE TERM IN SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS
MAY INCLUDE, BUT NOT BE LIMITED TO, PROJECTIONS OF REVENUES, INCOME, OR LOSS,
ESTIMATES OF CAPITAL EXPENDITURES, PLANS FOR FUTURE OPERATIONS, PRODUCTS OR
SERVICES, AND FINANCING NEEDS OR PLANS, AS WELL AS ASSUMPTIONS RELATING TO THE
FOREGOING. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "ESTIMATE," "PROJECT,"
AND SIMILAR EXPRESSIONS IDENTIFY FORWARD LOOKING STATEMENTS, WHICH SPEAK ONLY
AS OF THE DATE THE STATEMENT WAS MADE. FORWARD LOOKING STATEMENTS ARE
INHERENTLY SUBJECT TO RISKS AND UNCERTAINTIES, SOME OF WHICH CANNOT BE
PREDICTED OR QUANTIFIED. FUTURE EVENTS AND ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN, CONTEMPLATED BY, OR UNDERLYING THE FORWARD
LOOKING STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE OR
REVISE ANY FORWARD LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS, OR OTHERWISE. THE FOLLOWING DISCLOSURES, AS WELL AS OTHER
STATEMENTS IN THIS REPORT ON FORM 10-K, AND IN THE NOTES TO THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS, DESCRIBE FACTORS, AMONG OTHERS, THAT COULD
CONTRIBUTE TO OR CAUSE SUCH DIFFERENCES, OR THAT COULD AFFECT THE COMPANY'S
STOCK PRICE.
22
<PAGE> 24
RESULTS OF OPERATIONS
Revenge was originally incorporated as Contracap, Inc., a Nevada
corporation in 1979. After undergoing several name changes, Contracap, Inc.
became Global Energy Organization Corporation ("Global") which had no business
activities as of September, 1998. In January, 1998, the present Revenge entity
was created by means of a Reverse merger of Revenge Yachts, Inc., an Oklahoma
corporation, into Global, which created Revenge Marine, Inc., a Nevada
corporation. Revenge restated its purpose as consolidating marine manufacturing
and marketing operations. Revenge completed acquisitions of Egret Boat Company
and Consolidated Marine, Inc. in June and August of 1998. These acquisitions
gave Revenge manufacturing and repair capabilities.
In October, 1998, Revenge completed the acquisition of the
manufacturing assets of Blackfin Yacht Corporation. Revenge borrowed $2.1
million from Finova Capital Corporation to procure these assets and provide
working capital. In October, 1998, Revenge commenced its manufacturing
operations in its newly renovated Miami facility and began closing the
Consolidated Marine facility in Dania. Revenge was unable to generate
sufficient cash flow or revenues to continue its marine manufacturing
operations, to service its obligations to Finova Capital Corporation or to pay
its lease payments on the Miami facility. Revenge was unable to raise
sufficient funds from equity or debt to allow its manufacturing operation to
continue. Revenge attempted a merger with First Chance Marine, Inc. in order to
increase sales opportunities and investment possibilities for the combined
companies in March of 1999. The merger was not successful in achieving these
goals and was rescinded in June of 1999. Except for the completion of a few
boats in progress which were financed entirely by customers, Revenge ceased its
manufacturing operations in June of 1999. Subsequent to the end of the fiscal
year covered by this report on Form 10 K, Revenge disposed of its marine
manufacturing assets, which constituted substantially all of the Revenge
assets, excluding 500,000 common shares of First Chance Marine Finance, Inc.
With no significant assets and no revenue, Revenge restated its
purpose in September of 1999 as developing, coordinating and deploying internet
and e-commerce solutions to the recreational products, recreational sports and
recreational sports travel market, as well as recreational boating and sports
fishing. No operations consistent with the restated purpose have commenced as
of the filing of this statement.
LACK OF COMPARABILITY. For accounting purposes, and as a result of the
discontinuations of the manufacturing operations of Revenge, the operational
results for Fiscal 1998 and Fiscal 1999 are not comparable. Revenge had just
commenced its manufacturing operations at the close of Fiscal 1998. Because
operations had just commenced, the relatively modest losses occuring in Fiscal
1998 relative to Fiscal 1999 do not necessarily indicate the development of a
new trend.
REVENUES. Revenge's net loss from operations increased from a loss of
$318,932 in Fiscal 1998 to $4,350,855 in Fiscal 1999. The increase was
primarily the result of three elements: (i) the 1998 loss did not reflect more
than two months of manufacturing operations as opposed to the nearly twelve
months of manufacturing operations contained in the Fiscal 1999 loss; (ii)
Revenge significantly increased its overhead and expenses with the Blackfin
Acquisition and development of the Blackfin manufacturing capability and the
opening of the Miami facility; and (iii) Revenge was losing money on each
vessel that it built from the commencement of its operations, so that an
increase in vessel construction naturally corresponded to a proportionate
increased loss.
LOSS RELATING TO DISCONTINUED OPERATIONS The Company incurred a loss
of approximately $3,432,808 from discontinued operations and a loss of $918,047
on the disposal of assets for the year ended June 30, 1999 which were not
incurred in 1998, and which the Company believes will not recur in the future.
These charges were associated with discontinuation of manufacturing operations
and the Company's shift to focus on the internet and related information
technology industries.
23
<PAGE> 25
INTEREST EXPENSE. Interest expense totaled $155,316 for the year ended
June 30, 1999 compared to $8,134 during 1998, an increase of $147,182 or 95%.
This resulted primarily from interest on debt attributable to the Blackfin
Asset Acquisition and working capital related thereto borrowed from Finova
Captial Corporation.
LIQUIDITY AND CAPITAL RESOURCES The following table sets forth the
major components of the decrease in the cash and cash equivalents of Revenge:
<TABLE>
<CAPTION>
Item 1999 1998
- ---- ----------- --------
<S> <C> <C>
Net Cash Used by Discontinued Operations (1,536,245) (275,839)
Net Cash used by Investing Activities (1,499,602) (108,063)
Net Cash Provided by Financing Activities 2,933,054 486,695
Net Increase (Decrease) in cash (102,793) 102,793
</TABLE>
The net decrease in cash for the period can be attributed primarily to
the increased overhead of the Miami facility, the expenses associated with
establishing and maintaining the Blackfin production line and with servicing
the increased overhead of the Miami facility and the Finova obligations.
Although Revenge took certain steps during Fiscal 1999 to increase the amount
of available cash through financings, it was only able to raise $450,000 from
the aborted First Chance merger. Although management took an across the board
15% paycut and laid off nearly 40% of the workforce during the third quarter of
1999, these changes were not sufficient to provide any available cash to the
company for its operations.
OPERATIONAL CHANGES. Management undertook a major restructuring of the
Company beginning in late fiscal 1999 with the intent of divesting the Company
of its marine manufacturing assets. Some components of the restructuring
included the following: Laying off or terminating all of the full-time
employees with the exception of Mr. Robinson, ceasing all payment of salary,
vacating the Miami facility, selling the manufacturing assets for cash to pay
off the Finova debt and attempting to settle the outstanding payables to
creditors. Most of these efforts were not commenced until the end of Fiscal
1999 and the beginning of Fiscal 2000. There is no meaningful comparison
between the financial results of a non-operating company and those of an
operating company and therefore, no meaningful trend can be inferred by
financial developments during the last quarter of fiscal 1999.
CREDIT FACILITIES. The Company's credit facility with Finova Capital
Corporation was retired in August, 1999, after the close of Fiscal 1999. In
addition, any debts associated with the original acquisition of Egret and
Consolidated were disposed of in August of 1999.
SEASONALITY. Management doesn't believe that seasonality played a
meaningful role in the operational results of Fiscal 1999.
INFLATION. Management believes that there were no significant
inflationary price pressures that effected earnings from Fiscal 1998 to Fiscal
1999.
RECENT ACCOUNTING PRONOUNCEMENT
The Company does not believe its results for Fiscal 1999 were
significantly impacted by any recent accounting pronouncements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Revenge does not invest or trade in foreign currency or commodity
transactions which would ordinarily be subject to market risk. As Revenge has
very little indebtedness presently tied to the prime rate, Revenge would not be
immediately effected by increases in the prime rate, except as Revenge began to
borrow additional capital to implement its internet and information technology
business plans. Revenge believes, however, that its financial instruments are
24
<PAGE> 26
disclosed at their fair values. Fair value estimates are made at a specific
point in time and are based on relevant market information and information
about the financial instrument; they are subjective in nature and involve
uncertainties and matters of judgment and, therefore, cannot be determined with
precision. These estimates do not reflect any premium or discount that could
result from offering for sale at one time the Company's entire holdings of a
particular instrument. Changes in assumptions could significantly affect these
estimates. The carrying amount of cash and cash equivalents is assumed to be
the fair value because of the liquidity of these instruments. The carrying
amount of accounts payable and accrued expenses approximates fair value because
of the short maturity of these instruments. The terms of the Company's notes
payable approximates the terms in the market place at which they could be
replaced. Therefore, the fair value approximates the carrying value of these
financial instruments.
Item 8. Financial Statements and Supplementary Data
The financial statements are set forth in appendix A hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Part III
Item 10. Directors and Officers of the Registrant
The executive officers, directors and other key employees of the Company, and
their ages and positions as of June 30, 1999, are as follows:
NAME AGE POSITION
- ---- --- --------
William Robinson 43 President, Chief Executive Officer, Director and
Secretary of Revenge
James Gardiner 43 Vice President and Director of Revenge*
Scott Flanders 54 Vice President and Director of Revenge*
James Gardiner, Scott Flanders resigned their offices and
directorships of Revenge in August of 1999.
William C. Robinson has served as a Director of Revenge since its
present inception in January of 1998. Mr. Robinson has served as President and
Chief Excutive Officer of Revenge since February of 1999. Prior to Revenge, Mr.
Robinson served as an officer of Maxxon, Inc., a medical device manufacturer
from February of 1997 through September of 1998. From February of 1996 until
February of 1997, Mr. Robinson served as President of Marine Acquisitions,
Inc., a manufacturer of sportfishing yachts. Prior to Marine Acquisitions, Mr.
Robinson served as a Vice President of Investments of Prudential Securities.
James Gardiner has served as a director and vice president of Revenge
since July of 1998. For the five years prior to Revenge, Mr. Gardiner was the
founder of Consolidated Yacht Corporation, which, under his leadership grew to
an $8 million boat builder, re-fitter, and repairer in five years, utilizing
advanced composite materials that today lead the industry. Egret Boat has
become the recognized quality and design leader in the highly specialized 16'
and 18' fishing boat, or "flats boat", industry that sells to affluent fishing
enthusiasts. Prior to founding Consolidated and Egret, Jim was a composite
materials consultant to Gougeon Bros., a custom builder of boats, plugs, and
molds. He has also served as production manager in charge of construction of
plugs, molds, and custom fiberglass motor yachts, developing advanced
vacuum-bagged, cored fiberglass construction.
25
<PAGE> 27
Scott Flanders has served as a director and vice-president of Revenge
since July, 1998. Concurrent with his involvement at Revenge, Mr. Flanders has
been for more than six years, a sales representative of Lewis Marine, a
supplier of parts and accessories to the marine trade.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The registrant was not supplied with copies of any forms filed by any
individuals under section 16(a) of the Securities and Exchange Act of 1934 and
has no basis to assess compliance with the same.
Item 11. Executive Compensation
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company during the Company's fiscal years ending June 30, 1999 and
June 30, 1998 to the Company's Chief Executive Officer. Note that no other
executive officer was compensated in excess of $100,000 per year. No directors
were compensated as such.
Summary Compensation Table
<TABLE>
<CAPTION>
Restricted
Other Annual Stock LTIP All Other
Name and Position Year Salary Bonus Compensation Awards SAR's Payouts Compensation
- ------------------ ---- ------ ----- ------------- ----------- ----- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Robinson 1998 0 0 0 0 0 0 0
CEO
William Robinson 1999 $72,000 0 0 0 605,000 0 $2.900
CEO
Donald Mitchell 1998 0 0 0 0 0 0 0
CEO*
Donald Mitchell 1999 $90,000 0 0 0 300,000 0 $2,900
CEO
</TABLE>
* Donald Mitchell served as CEO of Revenge from September, 1998 through
February, 1999.
Option/SAR Grants Table
<TABLE>
<CAPTION>
% of total
SARs granted Potention Gain Potential Gain
Name Numbe of SARs to employees Exercise Price Expiration at 5% a 10%
- ---- ------------- ------------ -------------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. 605,000 22% $0.37 12-31-03 $11,192.50 $22,385
Robinson CEO
Donald Mitchell 300,000 11% $0.34 12-31-03** $ 5,100 $10,200
CEO*
</TABLE>
* Donald Mitchell served as CEO of Revenge from September, 1998 through
February, 1999.
** Although the expiration date of the option is 12-31-03, the option contract
provides that exercise must take place within two months of termination from
Revenge. Mr. Mitchell did not exercise any options within two months of his
termination. Management has not yet determined whether the terms of Mr.
Mitchell's departure from the company allow his options to expire on 12-31-03
or whether they are already expired.
26
<PAGE> 28
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Value of
Unexercised Unexercised
Shares Options In-the-Money
Acquired on Exerciseable/ Optionsbat FY
Name Exercise Value Realized Unexercisable End ($)
- ---- ----------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
William C. Robinson 0 0 554,583/ 0
CEO 50,417
Donald Mitchell 0 0 300,000/ 0
CEO* 0
</TABLE>
* Donald Mitchell served as CEO of Revenge from September, 1998 through
February, 1999.
Director Compensation
The directors are not compensated for being directors.
Employment Agreements
The Registrant has no employment agreements.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Shares beneficially Owned Percentage of Class
- ------------------- ------------------------- -------------------
<S> <C> <C>
Capital Markets Alliance
and Affiliates(2) 2,464,271(2)(3) 22.6%
James Gardiner(5) 1,295,333(4) 11.8%
Andrew M. Badolato 1,000,000 9.2%
Roy Meadows 900,171 8.25%
Scott Flanders(5) 579,058(3) 5.31%
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that person
that are currently exercisable or exercisable within 60 days of June 30,
1998 are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of
each other person. Except as indicated in the footnotes to this table and
pursuant to applicable community property laws, each stockholder named in
the table has sole voting and investment power with respect to the shares
set forth opposite such stockholder's name.
27
<PAGE> 29
(2) Shares owned by Capital Market Alliance, Inc. are under the beneficial
ownership of Mrs. Desai Robinson, wife of William C. Robinson, an officer
and director. Capital Markets Alliance, Inc., is owned by Allied Capital
Corporation, which is owned by the Desai V. Robinson Living Trust. In
addition, Allied Capital Corporation owns 40,000 shares of Common Stock.
100,000 shares of Common Stock are also held by the Desai Vol Robinson
Children's Trust for the benefit of Mrs. Robinson's children.
(3) Includes the right to acquire 605,000 common shares at a per share price
of $0.37.
(4) Includes the right to acquire 605,000 common shares at a per share price
of $0.37
(5) Resigned as an officer and director effective August, 1999.
Item 13. Certain Relationships and Related Transactions
ALLIED CAPITAL CORPORATION
Since inception, Allied Capital Corporation ("Allied") has
periodically advanced cash to the Company and has directly paid legal and other
expenses on behalf of the Company. Allied owns 40,000 shares of the Company's
common stock and is the owner of Capital Markets Alliance, Inc., which is the
Company's principal shareholder, owning 1,954,431 of the 10,898,810 shares of
common stock outstanding at June 30, 1999. Allied is wholly owned by the Desai
Robinson Trust Fund. Desai Robinson is the former president of Revenge Marine
during fiscal 1998 and is the wife of William C. Robinson, President and Chief
Executive Officer of the Company. Thomas Schroeder, who resigned as Vice
President and Chief Financial Officer of Revenge Marine, Inc. effective June
30, 1998, and as a director in August, 1999, is President of Capital Markets
Alliance. At June 30, 1999 and 1998, the Company's total debt to Allied was
$127,304 and $145,528, respectively.
CONSOLIDATED YACHT CORPORATION
The Company purchased certain assets of Consolidated Yacht Corporation
in October 1998. Jim Gardiner, President of CYC, was an officer of Revenge
Marine at the time of the asset purchase and CYC shared its manufacturing
facilities with Egret Boat Company prior to the asset purchase.
28
<PAGE> 30
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements and Financial Statement Schedules. The following
Consolidated Financial Statements and supporting schedule of Revenge Marine,
Inc. and the Report of Independent Auditors are included at pages F-1 through F-
of this Form 10-K.
<TABLE>
<CAPTION>
Description Page No.
- ----------- --------
<S> <C>
Independent Auditors' Report.................................................... ...................F-1
Consolidated Balance Sheets as of June 30, 1999 and June 30, 1998...................................F-2
Consolidated Statements of Operations for Years Ended June 30, 1999 and June 30,
1998.............................................................................................F-3
Consolidated Statements of Cash Flows for the Years Ended June 27, 1999 and June 28,
1998.............................................................................................F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
June 27, 1999 and June 28, 1998..................................................................F-5
Notes to Consolidated Financial Statements..........................................................F-6
</TABLE>
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be set forth
therein is included in the Consolidated Financial Statements or notes thereto.
REPORTS ON FORM 8-K
Current Report on Form 8-K dated February 26, 1999, reporting the
terms of a merger with First Chance Marine Finance, Inc.
Current Report on Form 8-K dated March 29, 1999, reporting the revised
terms of a merger with First Chance Marine Finance, Inc.
Current Report on Form 8-K dated September 9, 1999, reporting the
terms of a letter of intent for merger with Reel Fishing Corporation, the sale
of the Blackfin Assets, the sale of the Egret Assets and the sale of the
Consolidated Yacht Assets.
Current Report on Form 8-K dated September 9, 1999, reporting the
terms of a letter of intent for merger with Reel Fishing Corporation, the sale
of the Blackfin Assets, the sale of the Egret Assets and the sale of the
Consolidated Yacht Assets.
29
<PAGE> 31
EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
3.1 Certificate of Incorporation of the Company, as amended,
incorporated by reference to the Company's registration
statement on Form 10 filed on October 28, 1998.
3.2 Amended and Restated Bylaws of the Company, incorporated by
reference to the Company's registration statement on Form 10
filed on October 28, 1998.
4.1 Form of the Company's Common Stock Certificate, incorporated
by reference to the Company's Form 10
10.1 Agreement of Merger with First Chance Marine Finance, Inc.
incorporated by reference from the Company's report on 8-K
dated March 29, 1999.
10.2 Rescission Agreement with First Chance Marine Finance, Inc.,
incorporated by reference from the Company's report on 10-Q
dated July 29, 1999.
10.3 1998 Revenge Marine, Inc. Incentive Stock Option Plan and
Related Agreements Adopted by the Board of Directors.
10.4 Termination and Replacement Agreement between Registrant and
Blackfin Yacht Acquisition Corporation dated June 30, 1999.
10.5 Warrant Agreement between Registrant and Blackfin Yacht
Acquisition Corporation dated June 30, 1999.
10.6 Warrant Agreement between Registrant and Pete Johnson dated
June 30, 1999.
10.7 Asset Purchase Agreement between Registrant and Consolidated
Yacht Corporation dated June 30, 1999 and incorporated by
reference from the Company's report on 8-K dated September 9,
1999.
21.1 List of Subsidiaries.
23.1 Consent of Cross and Robinson, Independent Auditors.
27.1 Financial Data Schedule for June 30, 1998.
27.2 Financial Data Schedule for June 30, 1999.
30
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 3, 1999 REVENGE MARINE, INC.
By /s/ William C.Robinson
-------------------------------------
William C. Robinson
President and Chief Executive Officer
31
<PAGE> 33
REVENGE MARINE, INC.
--------------------
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
AND
INDEPENDENT AUDITOR'S REPORT
<PAGE> 34
REVENGE MARINE, INC.
--------------------
C O N T E N T S
PAGE
----
Independent Auditor's Report 1
Consolidated Balance Sheet 2
Consolidated Income Statements 3
June 30, 1999 Consolidated Statement of Shareholders' Equity 4
June 30, 1998 Consolidated Statement of Shareholders' Equity 5
Consolidated Statement of Cash Flows 6
Notes to Consolidated Financial Statements 7-19
<PAGE> 35
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Revenge Marine, Inc.
We have audited the accompanying consolidated balance sheets of
Revenge Marine, Inc., (a Nevada corporation) and subsidiaries as of June 30,
1999 and 1998, and the related consolidated statements of income, shareholders'
equity, and cash flows for the year ended June 30, 1999 and for the period from
September 5, 1997 (date of inception) to June 30, 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Revenge Marine, Inc. as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for the initial period then ended in conformity
with generally accepted accounting principles.
CROSS AND ROBINSON
Certified Public Accountants
September 10, 1999
Page 1 of 19
<PAGE> 36
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 1999 AND 1998
-----------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ -- $ 102,793
Proceeds receivable, discontinued operations (Note 3) 2,200,000 --
Prepaid Expenses 60,000 176,608
Work in Progress -- 60,500
----------- -----------
TOTAL CURRENT ASSETS 2,260,000 339,901
----------- -----------
PROPERTY AND EQUIPMENT, NET (NOTE 5) 1,796 239,420
----------- -----------
OTHER ASSETS
Deposits -- 50,000
Investment in First Chance Marine Finance, Inc. (Note 4) 1,000,000 --
Intangible assets, net (Note 6) 1,700 2,366,483
----------- -----------
TOTAL OTHER ASSETS 1,001,700 2,416,483
----------- -----------
TOTAL ASSETS $ 3,263,496 $ 2,995,804
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdrafts $ 3,636 $ --
Accounts payable 933,557 28,916
Accounts payable-related parties (Note 7) 127,304 50,786
Accrued liabilities 198,744 9,283
Customer deposits -- 64,500
Notes payable (Note 8) 2,116,500 66,252
Notes payable-related parties (Note 8) -- 94,742
----------- -----------
TOTAL LIABILITIES 3,379,741 314,479
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 13) 79,000 0
----------- -----------
SHAREHOLDER'S EQUITY
Preferred stock, 5,000,000 shares authorized, no shares
outstanding at June 30, 1998; 2718 shares of $40 par
Series B Convertible Preferred Stock (liquidation 108,720 --
preference $108,720) outstanding at June 30, 1999
Common stock $0.001 par value, 50,000,000 shares
authorized 10,898,810 and 6,675,720 shares issued
and outstanding at June 30, 1999 and 1998, respectively 10,899 6,676
Subscriptions receivable -- (100,000)
Additional paid-in capital 4,354,923 3,093,581
Retained earnings (4,669,787) (318,932)
----------- -----------
TOTAL SHAREHOLDER'S EQUITY (195,245) 2,681,325
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 3,263,496 $ 2,995,804
=========== ===========
</TABLE>
Accompanying notes are an integral part of the consolidated
financial statements.
Page 2 of 19
<PAGE> 37
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
-----------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
------------------------------------------------------
SEPTEMBER 5, 1997 (DATE OF INCEPTION) TO JUNE 30, 1998
------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DISCONTINUED OPERATIONS (NOTE 3):
LOSS FROM DISCONTINUED OPERATIONS $(3,432,808) (318,932)
LOSS ON DISPOSAL OF ASSETS
FROM DISCONTINUED OPERATIONS (918,047) --
----------- --------
NET LOSS $(4,350,855) $ (318,932)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING (NOTE 10) 7,129,680 4,325,237
=========== ===========
NET LOSS PER SHARE FROM DISCONTINUED OPERATIONS $ (0.61) $ (0.07)
=========== ===========
</TABLE>
Accompanying notes are an integral part of the consolidated
financial statements.
Page 3 of 19
<PAGE> 38
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
----------------------------------------------
FOR THE YEAR ENDED JUNE 30, 1999
--------------------------------
<TABLE>
<CAPTION>
ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT)
--------- ------ ---------- ---------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $ -- $ 6,676 $ 3,093,581 $ (318,932)
1,004,005 shares issued through
conversion of debentures -- 1,004 243,546
180,692 shares issued pursuant to asset
purchase agreement (Note 4) -- 180 236,888
194,281 shares issued in exchange
for services rendered -- 194 155,299
1,692,558 shares issued to First Chance
per rescission agreement (Note 4) -- 1,693 1,448,307
895,333 shares cancelled pursuant to
CYC rescission agreement (Note 4) -- (895) (1,368,964)
895,333 shares issued pursuant to lease
settlement agreement (Note 13) -- 895 177,105
5,938 shares issued in exchange for
cancellation of debt 237,500 -- --
1,206 shares issued pursuant to BYC
rescission agreement (Note 4) 48,240 -- --
4,832 shares issued for cash 193,293 -- --
9,258 shares of preferred stock converted
into 1,151,554 common shares (370,313) 1,152 369,161
NET LOSS (4,350,855)
---------- -------- ----------- -----------
BALANCE AT JUNE 30, 1999 $ 108,720 $ 10,899 $ 4,354,923 $(4,669,787)
========== ======== =========== ===========
</TABLE>
Accompanying notes are an integral part of the consolidated
financial statements.
Page 4 of 19
<PAGE> 39
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
----------------------------------------------
FOR THE PERIOD SEPTEMBER 5, 1997 (DATE OF INCEPTION)
----------------------------------------------------
TO JUNE 30, 1998
----------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------- PAID - IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------ ------ ------------ --------
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $0.001
50,000,000 SHARES AUTHORIZED:
Issued for cash, September 1997 3,000,000 3,000 --
Stock subscription, December 1997, less
issuance costs of $ 7,800 240,000 240 471,960
Issued to original Global shareholders,
per agreement dated January 23, 1998 798,890 799 (799)
Proceeds from 504 offering dated
February 2, 1998 500,000 500 --
Proceeds from conversion of debentures
dated March 27, 1998 250,713 251 249,749
Issued through private offering dated
May 10, 1998, in exchange for services 333,761 334 174,223
Private offering dated May 15, 1998:
Issued for cash 100,000 100 99,900
Subscribed to at June 30,1998 100,000 100 99,900
Issued to the shareholder's of Egret Boat
Company, May 1998 955,414 955 1,499,045
Issued to the shareholder's of Consolidated
Marine, Inc., May 1998 636,942 637 999,363
Stock issuance costs January - June 1998 -- -- (20,000)
Stock subscription cancelled (240,000) (240) (479,760)
Net loss for the period -- -- -- (318,932)
----------- --------- ----------- ---------
BALANCE AT JUNE 30, 1998 $ 6,675,720 $ 6,676 $ 3,093,581 $(318,932)
=========== ========= =========== =========
</TABLE>
Accompanying notes are an integral part of the consolidated
financial statements.
Page 5 of 19
<PAGE> 40
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
-----------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD
---------------------------------------------------
SEPTEMBER 5, 1997 (DATE OF INCEPTION) TO JUNE 30, 1998
------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 6,817,156 $ 142,286
Interest received 18,120 15
Cash paid for goods and services (8,216,205) (416,600)
Interest paid (155,316) (1,540)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (1,536,245) (275,839)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES:
Fixed asset purchases and improvements (1,499,602) (108,063)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 721,048 353,500
Proceeds from long-term debt 2,100,000 --
Proceeds from short-term debt 331,500 161,952
Repayment of short-term debt (160,994) (957)
Repayment of long-term debt (58,500) --
Stock issuance costs incurred -- (27,800)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,933,054 486,695
----------- -----------
NET INCREASE IN CASH (102,793) 102,793
CASH AT BEGINNING OF PERIOD 102,793 --
----------- -----------
CASH AT END OF PERIOD $ -- $ 102,793
=========== ===========
RECONCILIATION OF NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:
Net Loss .............................................. $(4,350,855) $ (318,932)
Adjustments to reconcile net loss to net
cash used by operating activities:
Loss on sale of assets ........................... 918,047 --
Depreciation ..................................... 174,790 6,752
Amortization of intangible assets ................ 61,268 6,511
Stock issued in exchange for services ............ 322,288 174,557
Stock issued pursuant to BYC rescission .......... 48,240 --
Increase (Decrease) in customer deposits ......... (64,500) 64,500
(Increase) Decrease in work in progress .......... 60,500 (60,500)
(Increase) Decrease in deposits .................. 50,000 (50,000)
Increase (Decrease) in accrued liabilities ....... 501,971 60,066
(Increase) Decrease in stock subscriptions rec.... 100,000 --
(Increase) Decrease in prepaid assets ............ 89,561 (176,607)
(Increase) Decrease in accounts receivable ....... (238,430)
(Increase) Decrease in intangible assets ......... -- (11,102)
Increase (Decrease) in accounts payable .......... 708,238 28,916
Increase (Decrease) in contingent liabilities .... 79,000 --
Increase (Decrease) in cash overdrafts ........... 3,636 --
----------- -----------
Total adjustments ................................ 2,814,610 43,093
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES ................. $(1,536,245) $ (275,839)
=========== ===========
SCHEDULE OF OTHER NON-CASH TRANSACTIONS:
Stock issued in connection with subsidiary acquisitions $ 237,068 $ 2,500,000
Stock issued pursuant to a subscription agreement ..... $ -- $ 100,000
Loans converted to stock .............................. $ 237,500 $ --
Stock issued pursuant to rescission agreements ........ $ 1,498,240 $ --
Stock cancelled pursuant to rescission agreements ..... $(1,369,859) $ --
</TABLE>
Accompanying notes are an integral part of the consolidated
financial statements.
Page 6 of 19
<PAGE> 41
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Revenge Marine, Inc. (hereinafter referred to as
"Revenge" or "the Company") is a publicly traded Nevada
company that was incorporated December 28, 1979. The Company
has operated under various names since its incorporation,
most recently operating as Global Energy Organization
Corporation ("Global"). The Company had no significant
operations from January 1995 through January 1998.
The Company entered the development stage after it
reorganized in January 1998 (see Note 4) and changed its
primary focus to acquiring yacht manufacturing and marine
technology companies. In July 1998, the Company commenced its
principal operations and was no longer considered to be in
the development stage for the fiscal year ended June 30,
1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements include the
accounts of Revenge Marine, Inc. and its wholly owned
subsidiaries, Revenge Marine, Inc., (an Oklahoma
corporation), Egret Boat Company, Inc., (a Florida
corporation), and Consolidated Marine, Inc. (a Florida
corporation), after elimination of all material intercompany
transactions and balances.
CASH AND CASH EQUIVALENTS
The Company considers highly liquid investments
(that are readily convertible to cash) purchased with
original maturity dates of three months or less to be cash
equivalents.
Cash overdraft positions may occur from time to time
due to the timing of making bank deposits and releasing
checks in accordance with the Company's cash management
policies.
REVENUE RECOGNITION
Revenue from newly manufactured boats is recognized
when the completed boat is delivered and title is transferred
to the customer. Revenue from other projects is recognized
upon completion of the project. Revenues are recorded net of
returns, allowances and discounts.
Page 7 of 19
<PAGE> 42
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include organizational costs,
costs associated with developing a new line of yachts, and
the Company's investment in its subsidiaries in excess of the
book value of the subsidiaries' net assets. Intangible assets
are amortized over their estimated useful life (generally 5
to 15 years) using the straight-line method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and
depreciated using the straight-line method for financial
reporting and accelerated methods for income tax purposes
over the estimated useful life of the asset, typically 5 to
10 years. Leasehold improvements are amortized over the
shorter of the useful life of the improvement or the
remaining term of the lease. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss
is reflected in operations in the period realized.
INCOME TAXES
The Company uses the liability method of accounting
for income taxes as set forth in Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."
Under the liability method, deferred taxes are determined
based on the differences between the financial statement and
tax bases of assets and liabilities at enacted tax rates in
effect in the years in which the differences are expected to
reverse. Presently, the Company files its tax returns on a
calendar year basis, which may result in temporary
differences in book and tax reporting. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized.
USE OF ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported revenues and expenses
during the reporting period. Accordingly, actual results could
differ from those estimates.
Page 8 of 19
<PAGE> 43
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER SHARE
The Company has adopted the provisions of SFAS No.
128, "Earnings per Share", which requires presentation on the
face of the income statement of both basic and diluted
earnings per share. Basic and diluted earnings per share have
replaced the previously presented primary and fully diluted
earnings per share. Basic earnings per share is computed by
dividing net income attributable to common shares by the
weighted average number of common shares outstanding during
the period. Diluted earnings per share is computed based on
the assumption that all of the Company's outstanding common
stock options, warrants, and convertible preferred stock are
converted into common shares.
In years where the Company recognizes a loss from
continuing operations, the assumed exercise of outstanding
stock options, warrants, and convertible preferred stock has
an antidilutive effect (i.e., it increases net loss per
share). As a result, these items are not included in the
weighted average number of shares used in the calculation of
loss per share in Note 10.
PREPAID EXPENSES
Certain expenses are routinely paid that cover more
than the current fiscal period. Prepaid expenses at June 30,
1999 and 1998 consisted of consulting services.
MARKETABLE SECURITIES
The Company accounts for marketable securities in
accordance with Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." This statement requires certain
investments to be recorded at fair value or amortized cost.
The appropriate classification of the investments in
marketable equity securities is determined at the time of
purchase and re-evaluated at each balance sheet date. The
Company's investment in First Chance Marine Finance, Inc.
(see Note 4) is recorded at cost, as the fair market value of
the equity securities could not be readily determined.
INVENTORIES
Inventories are stated at cost, determined by the
first-in, first-out method.
Page 9 of 19
<PAGE> 44
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
LEASES
Leases that transfer substantially all of the risks
and benefits of ownership are capital leases. Other leases
are operating leases. Capital leases are included in fixed
assets and are amortized using the straight-line method over
their respective terms. Operating leases are expensed over
the terms of the leases using the straight-line method.
ADVERTISING
The Company expenses all advertising costs as they
are incurred. Total advertising costs for the years ended
June 30, 1999 and 1998 were $371,350 and $5,821,
respectively.
NOTE 3 - DISCONTINUED OPERATIONS
In June 1999, the Company resolved to discontinue
its marine operations and to sell substantially all of its
assets. The assets were disposed of through the rescission of
the Consolidated Yacht Corporation ("CYC") acquisition (see
Note 4) and through two cash sales totaling $2,200,000 in
August 1999. Accordingly, the results of the Company's
operations and the loss on the disposal of assets have been
reflected as discontinued operations on the income statement.
The balance sheet reflects the assets remaining after the
disposal of assets was complete.
NOTE 4 - REORGANIZATION AND ACQUISITIONS
GLOBAL ENERGY ORGANIZATION CORPORATION
In January 1998, Revenge Marine, Inc. (formerly
Revenge Yachts, Inc.), an Oklahoma corporation, executed a
Stock Exchange Agreement (the "Agreement") with Global Energy
Organization Corporation ("Global"), a publicly traded Nevada
corporation, which had been inactive for the previous five
years.
Pursuant to the Agreement dated January 23, 1998,
Global issued 3,240,000 shares of its $.001 par value common
stock in exchange for 100% of the issued and outstanding
common stock of Revenge Marine, Inc. As a result of this
"reverse acquisition", Revenge Marine, Inc. became a wholly
owned subsidiary of Global. In accordance with the terms of
the agreement, Global (the Nevada parent) adopted the name
"Revenge Marine, Inc."
Page 10 of 19
<PAGE> 45
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
BYC ACQUISITION CORPORATION
Under an agreement dated October 22, 1998, the
Company purchased substantially all of the assets and certain
liabilities of BYC Acquisition Corporation ("BYC"), a
Delaware corporation. In consideration of the transfer of
assets and liabilities, Revenge paid $1,005,455 in cash and
issued a warrant entitling BYC to purchase up to 545,455
shares of Revenge's common stock at an exercise price of
$6.44 per share at any time through October 22, 2001. The
agreement also called for Revenge to pay a 2% of sales price
fee on all Blackfin sales to BYC for a period of three years
from the agreement date. The assets acquired consist
primarily of boat molds and shop equipment.
The purchase agreement was terminated pursuant to a
replacement agreement dated June 30, 1999, whereby all
assumed liabilities were returned to BYC, the stock warrant
was returned to Revenge, and the Company's obligation for any
accrued fees on Blackfin sales was terminated. In
consideration of the termination of the purchase agreement,
the Company issued to BYC 1,206 shares of its Series B
Cumulative Convertible Preferred Stock and issued a warrant
to purchase up to 1,500,000 shares of Revenge's common stock
at an exercise price of $0.37 per share. Further, the Company
is obligated to pay BYC a fee equal to 1% of its total
revenues from all sources for the period from April 1, 1999
to April 30, 2002.
CONSOLIDATED YACHT CORPORATION, INC.
On September 8, 1998, the Company purchased
substantially all of the assets of Consolidated Yacht
Corporation, Inc. ("CYC") in exchange for a promissory note
in the amount of $458,162. The president of CYC was a related
party to the Company as further disclosed in Note 7.
The purchase agreement was terminated by means of a
rescission agreement dated June 30, 1999. The rescission
agreement called for the return of all purchased assets, the
cancellation of the promissory note, and the immediate
vesting of stock options held by the president of CYC.
Further, an automobile was transferred to CYC in
exchange for monies advanced to Revenge by CYC's president.
CYC's president returned 895,333 shares of stock to the
Company, which had been issued to him pursuant to Revenge's
acquisition of Egret Boat Company and Consolidated Marine
(see following disclosures). CYC will assume the lease on the
Company's operating facility.
Page 11 of 19
<PAGE> 46
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 4 - REORGANIZATION AND ACQUISITIONS (CONTINUED)
FIRST CHANCE MARINE FINANCE, INC.
On June 4, 1999, the Company entered into an
agreement to rescind an attempted merger with First Chance
Marine Finance, Inc. ("First Chance"), a Florida corporation.
Pursuant to this agreement, the Company issued a total of
1,696,000 shares of its common stock, valued at $1,450,000 to
First Chance and its associates. First Chance, which had
previously advanced the Company $450,000 in cash, issued
500,000 of its common stock, valued at $1,000,000 to Revenge.
The 500,000 shares issued to Revenge equate to approximately
7% of First Chance's total outstanding common stock at June
30, 1999.
EGRET BOAT COMPANY, INC.
Pursuant to a stock exchange agreement dated May 21,
1998, the Company issued 955,414 shares of its common stock,
valued at $1,500,000, in exchange for all of the outstanding
shares of Egret Boat Company, Inc., a Florida corporation.
The acquisition was accounted for as a purchase and,
accordingly, the results of operations of the acquired
business and the fair market values of the acquired assets
and liabilities are included with consolidated operations
from the date of acquisition. The purchase price was
allocated as follows:
Property and equipment $ 117,547
Working capital, net 20,061
Other intangible assets 1,362,392
-----------
Total $ 1,500,000
===========
CONSOLIDATED MARINE, INC.
Pursuant to a stock exchange agreement dated May 27,
1998, the Company issued 636,942 shares of its common stock,
valued at $1,000,000 in exchange for all of the outstanding
common shares of Consolidated Marine, Inc. (CMI), a Florida
corporation. The acquisition was accounted for as a purchase
and, accordingly, the results of operations of the acquired
business and the fair market values of the acquired assets
and liabilities are included with consolidated operations
from the date of acquisition. In August 1999, the purchase
price was renegotiated and an additional 180,692 shares of
Revenge stock valued at $237,068 were issued to CMI. The
revised purchase price was allocated as follows:
Organization costs $ 500
Other intangible assets 1,236,568
-------------
Total $ 1,237,068
=============
Page 12 of 19
<PAGE> 47
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at
June 30:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Molds and prototype $ -- $ 242,523
Equipment -- 85,000
Automobiles -- 45,493
Office equipment 5,374 5,429
--------- ---------
Total consolidated property and
Equipment 5,374 378,445
Less accumulated depreciation (1,229) (139,025)
--------- ---------
Net property and equipment $ 4,145 $ 239,420
========= =========
</TABLE>
Total depreciation expense for 1999 and 1998 was
$174,790 and $6,752, respectively.
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consists of the following at
June 30:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1999 1998 LIFE
--------------- ---------------- ---------------
<S> <C> <C> <C>
Investment in subsidiaries
in excess of book value $ -- $ 2,361,892 15 years
Marine assets -- 8,602 5 years
Organizational costs 2,500 2,500 5 years
----------- --------
Total intangible assets 2,500 2,372,994
Less accumulated amortization (800) (6,511)
----------- -----------
Net intangible assets $ 1,700 $ 2,366,483
=========== ===========
</TABLE>
The investment in subsidiaries and the marine assets
were charged to discontinued operations in the current year
(see Note 3). Total amortization expense for 1999 and 1998
was $61,268 and $6,511, respectively.
NOTE 7 - RELATED PARTY TRANSACTIONS
ALLIED CAPITAL CORPORATION
Since inception, Allied Capital Corporation
("Allied") has periodically advanced cash to the Company and
has directly paid legal and other expenses on behalf of the
Company. Allied owns 40,000 shares of the Company's common
Page 13 of 19
<PAGE> 48
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 7 - RELATED PARTY TRANSACTIONS (CONTINUED)
stock and is the owner of Capital Markets Alliance, Inc.,
which is the Company's principal shareholder, owning 1,954,431
of the 10,898,810 shares of common stock outstanding at June
30, 1999. Allied is wholly owned by the Desai Robinson Trust
Fund. Desai Robinson is the former president of Revenge Marine
and is the wife of William C. Robinson, President and Chief
Executive Officer of the Company. Thomas Schroeder, who
resigned as Vice President and Chief Financial Officer of
Revenge Marine, Inc. effective June 30, 1998, is President of
Capital Markets Alliance. At June 30, 1999 and 1998, the
Company's total debt to Allied was $127,304 and $145,528,
respectively.
CONSOLIDATED YACHT CORPORATION
As further disclosed in Note 4, the Company
purchased certain assets of Consolidated Yacht Corporation in
October 1998. Jim Gardiner, President of CYC, was an officer
of Revenge Marine at the time of the asset purchase and CYC
shared its manufacturing facilities with Egret Boat Company
prior to the asset purchase.
NOTE 8 - NOTES PAYABLE
Notes payable consists of the following at June 30:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Notes payable to related-party shareholders (see Note 7):
Promissory note, due on or before
November 16, 1998 at an interest rate of 10%
per annum. $ -- $ 94,742
Notes payable to other entities:
Note payable to FINOVA Capital
Corporation, secured by certain fixed assets,
due on or before October 00,0000, in default
at June 30, 1999, with interest equal to the
prime rate plus 1% (10% at June 30, 1999). 2,041,500 --
Demand note due on or before June 1, 1998,
in default at June 30, 1999, with an interest
rate of 10% per annum. $ -- 7,153
</TABLE>
Page 14 of 19
<PAGE> 49
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
<TABLE>
<CAPTION>
<S> <C> <C>
Unsecured $75,000 operating line of credit
with First Union National Bank, with interest
only payments due monthly at an interest rate
equal to the prime rate plus 2% (9.75% and
10.5% at June 30, 1999 and 1998, respectively). 75,000 53,000
Retail vehicle installment contract with Chrysler
Financial Corporation, due in monthly installments of
principal and interest of $613, with fixed interest at
8.9% until February 22, 1999. This note is secured by a
Dodge Caravan. -- 4,164
Retail vehicle installment contract with Ford Motor
Credit, due in monthly installments of principal and
interest of $613 with fixed interest at 8.25% until
December 29, 1998. This note is secured by a 1995 Ford
Econoline Van. -- 1,935
--------------- ----------------
Total Current Notes Payable $2,116,500 $160,994
=============== ================
</TABLE>
The note payable to FINOVA Capital Corporation was
paid in August 1999 from the proceeds of the asset sale
referred to in Note 3.
NOTE 9 - CAPITALIZATION
The capital stock of the corporation at June 30, 1999
was as follows:
Series B 10% Cumulative Convertible Preferred
Stock, $40 par value, convertible into Common Stock based on
a 40% discount to the bid price as listed on the NASDAQ
Bulletin Board on the day of conversion; authorized 75,000
shares; 17,330 shares issued and 2,718 shares outstanding at
June 30, 1999; liquidation preference equal to the par value
of any outstanding shares plus accrued dividends, if any
prior to any distributions to Common Stock holders.
Common Stock, $0.001 par value, 50,000,000 shares
authorized, 10,898,810 and 6,675,720 shares issued and
outstanding at June 30, 1999 and 1998.
Page 15 of 19
<PAGE> 50
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
NOTE 10 - INCOME PER COMMON SHARE
The computations of basic and dilutive income per
share from continuing operations were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- -----------
<S> <C> <C>
Income (loss) attributable to common shares $ (4,350,855) $ (318,932)
================ ===========
Weighted average common shares outstanding 7,129,680 4,325,237
================ ===========
Basic and dilutive income (loss) per share $ (0.61) $ (0.07)
================ ===========
</TABLE>
The Company's outstanding common stock options,
warrants and convertible preferred stock referred to in Notes
9 and 11 were not included in the computation of diluted loss
per share because the effect of their inclusion would be
antidilutive.
NOTE 11 - STOCK OPTIONS AND WARRANTS
In December 1998, the Company adopted its 1998
Incentive Stock Plan ("the Plan") under which 2.8 million
options to purchase common stock were granted to
substantially all full-time employees. The options granted
under the Plan extend for 5 years from the date of grant and
vest in monthly increments over a period of up to two years.
The exercise price was equal to the stock price on the grant
date. The Plan is considered to be a non-compensatory plan,
as defined by Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation". Accordingly,
no compensation cost has been recognized for the year ended
June 30, 1999.
In June 1999, the Company issued a warrant to
purchase up to 1,500,000 shares of the Company's common stock
at an exercise price of $0.37 per share. The warrant was
issued pursuant to a rescission agreement further disclosed
in Note 4. The warrant expires June 30, 2002.
In June 1999, the Company issued a warrant to
purchase up to 250,000 shares of the Company's common stock
at an exercise price of $0.37 per share in exchange for
consulting services relating to the BYC asset acquisition
further disclosed in Note 4. The warrant expires June 30,
2002.
In May 1998, the Company granted stock options
pursuant to a consulting agreement to purchase 175,000 shares
of common stock at $1.00 per share, 175,000 shares of common
stock at $1.50 per share, and 175,000 shares of common stock
at $2.00 per share. The options expire December 31, 2000.
In May 1998, the Company issued a warrant to
purchase up to 20,000 shares of the Company's common stock at
an exercise price of $1.50 per share as partial consideration
for consulting services.
Page 16 of 19
<PAGE> 51
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
Information with respect to all stock options and
warrants is summarized below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
SHARES EXERCISE PRICE
------------ ---------------
<S> <C> <C>
Outstanding at inception -- $ --
Granted 1998 545,000 1.50
------------ ---------------
Outstanding at June 30, 1998 545,000 1.50
Granted 1999 4,550,000 0.37
------------ ---------------
Outstanding at June 30, 1999 5,095,000 0.49
============ ===============
Options exercisable, June 30, 1998 545,000 1.50
Options exercisable, June 30, 1999 4,373,054 0.51
</TABLE>
NOTE 12 - INCOME TAXES
The Company has incurred net operating losses since
inception and has a loss carryforward of approximately
$4,300,000 at June 30, 1999, expiring in years beginning in
2013. As of June 30, 1999 and 1998, the Company had a net
deferred tax asset of $1,739,402 and $127,573 respectively. A
valuation allowance has been recognized to fully offset this
asset due to the uncertainty of realizing the future benefit in
accordance with the provisions of FASB Statement No. 109,
"Accounting for Income Taxes". The Company continually reviews
the adequacy of the valuation allowance and will recognize the
tax benefits of these assets only as assessment indicates that
it is more likely than not that the benefits will be realized.
Significant components of the Company's deferred tax
assets and liabilities as of June 30, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 1,739,402 $ 127,573
Valuation allowance (1,372,183) (110,861)
----------- -----------
Total deferred tax assets 367,219 16,712
----------- -----------
Deferred tax liabilities:
Loss on discontinued operations $ 367,219
Tax over book depreciation -- $ 18,680
Book over tax amortization -- (1,968)
----------- -----------
Net tax deferred liabilities 367,219 16,712
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
Page 17 of 19
<PAGE> 52
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
Deferred taxes reflect a combined federal and state
tax rate of approximately 40%. A reconciliation between the
amount of federal and state income taxes, based on a forty
percent (40%) tax rate, and the effective amount of income
taxes charged to operations is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Statutory federal income taxes (refund) (1,739,402) $ (127,573)
Loss on discontinued operations 367,219 --
Tax over book depreciation -- 16,712
Book over tax amortization -- 1,968
Valuation allowance 1,372,183 110,861
----------- -----------
Effective income taxes $ -- $ --
=========== ===========
</TABLE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES
PROMISSORY NOTE
On July 14, 1999, the Company signed a promissory
note to pay a related party $100,000 in exchange for funds
advanced by the payee to complete the construction of various
boats. The note, which is collateralized by a Blackfin boat,
bears interest at a rate of 10% per annum and is due on
January 1, 2000.
LEGAL PROCEEDINGS
The Company is engaged in legal proceedings arising
from normal business activities. In the opinion of legal
counsel, the maximum future liability arising from these
proceeding would not exceed $79,000.
LEASE OBLIGATIONS
In 1999, the Company was obligated under operating
and capital leases for its operating facility and certain
office equipment, most of which were cancelled or assumed by
other parties after the Company decided to discontinue its
marine operations (see Note 3). Amounts capitalized under a
capital lease were charged to discontinued operations upon
transfer of the lease to another party.
The lease on the Company's operating facility was
assumed by Consolidated Yacht Corporation, pursuant to an
October 1999 agreement with the owner of the property. In a
related settlement agreement with the landlord, the Company
co-signed a promissory note for $178,000, which is to be paid
by CYC. In consideration for paying the promissory note, the
Company agreed to nullify the cancellation of 895,333 shares
of Revenge Marine common stock owned by CYC's president.
These shares were to be cancelled pursuant to the June 30,
1999 rescission agreement disclosed in Note 4.
Page 18 of 19
<PAGE> 53
REVENGE MARINE, INC.
--------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1999 AND 1998
----------------------
The Company is obligated under a non-cancelable
lease for computer equipment. Subsequent to June 30, 1999,
the Company entered into an agreement to sublease the
computer equipment to Consolidated Yacht Corporation. The
Company's future minimum obligation under the computer lease
and the amount to be received under the subleasing agreement
is as follows:
FISCAL YEAR
ENDED JUNE 30,
-------------------
2000 $ 5,283
2001 5,283
2002 5,283
2003 4,403
------------
$ 20,252
============
Total rental expense under all leases was $623,672
and $ -0- in 1999 and 1998, respectively.
NOTE 14 - RECLASSIFICATIONS OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1998
financial statements to conform with the 1999 financial
statement presentation. Such reclassifications had no effect
on net income as previously reported.
Page 19 of 19
<PAGE> 1
EXHIBIT 10.3
REVENGE MARINE, INC.
1998 INCENTIVE STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as
shall be administering the Plan in accordance with Section 4 hereof.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the
Board in accordance with Section 4 hereof.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Revenge Marine, Inc., a Nevada corporation.
(h) "CONSULTANT" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "DIRECTOR" means a member of the Board of Directors of the
Company.
(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
<PAGE> 2
(k) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety (90)
days, unless reemployment upon expiration of such leave is guaranteed by statute
or contract. If reemployment upon expiration of a leave of absence approved by
the Company is not so guaranteed, on the 181st day of such leave any Incentive
Stock Option held by the Optionee shall cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's fee by the
Company shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation, The
Nasdaq OTC Bulletin Board, The Nasdaq National Market or The Nasdaq SmallCap
Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or system for the last market trading day prior to the
time of determination, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination;
or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
-2-
<PAGE> 3
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(s) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding Options are exchanged for Options with a lower exercise price.
(t) "OPTIONED STOCK" means the Common Stock subject to an
Option or a Stock Purchase Right.
(u) "OPTIONEE" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(v) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this 1998 Incentive Stock Plan.
(x) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(y) "SECTION 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.
(z) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(aa) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(bb) "STOCK PURCHASE RIGHT" means a right to purchase Common
Stock pursuant to Section 11 below.
(cc) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares which may be subject to
option and sold under the Plan is 1,500,000 Shares. The Shares may be authorized
but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the
-3-
<PAGE> 4
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, upon exercise of either an Option
or Stock Purchase Right, shall not be returned to the Plan and shall not become
available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the Board
or a Committee appointed by the Board, which Committee shall be constituted to
comply with Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, the Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered
by each such award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, of any
Option or Stock Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or times when
Options or Stock Purchase Rights may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or Stock
Purchase Right or the Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances
an Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option has declined since the date the Option was granted;
-4-
<PAGE> 5
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by Optionees
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right
shall confer upon any Optionee any right with respect to continuing the
Optionee's relationship as a Service Provider with the Company, nor shall it
interfere in any way with his or her right or the Company's right to terminate
such relationship at any time, with or without cause.
-5-
<PAGE> 6
6. TERM OF PLAN. The Plan shall become effective upon its adoption by
the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. In the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant or such shorter term as may be provided
in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
upon exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the
time of grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the exercise price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
(B) granted to any other Service Provider, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant to
a merger or other corporate transaction.
-6-
<PAGE> 7
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
-7-
<PAGE> 8
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an
Optionee ceases to be a Service Provider, such Optionee may exercise his or her
Option within such period of time as is specified in the Option Agreement (of at
least thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (of at least six (6) months) to the extent that the
Option is vested on the date of death (but in no event later than the expiration
of the term of such Option as set forth in the Option Agreement) by the
Optionee's estate or by a person who acquires the right to exercise the Option
by bequest or inheritance. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, at the time of death, the Optionee is not vested
as to the entire Option, the Shares covered by the unvested portion of the
Option shall immediately revert to the Plan. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The
Options and Stock Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in
-8-
<PAGE> 9
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. The terms of the offer shall comply in
all respects with Applicable Law. The offer shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
-9-
<PAGE> 10
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock
-10-
<PAGE> 11
Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
13. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall
-11-
<PAGE> 12
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise
of an Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
-12-
<PAGE> 13
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
19. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide
to each Optionee and to each individual who acquires Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
-13-
<PAGE> 14
Sample Option Agreement
REVENGE MARINE, INC.
1998 INCENTIVE STOCK PLAN
STOCK OPTION AGREEMENT
UNLESS OTHERWISE DEFINED HEREIN, THE TERMS DEFINED IN THE PLAN SHALL
HAVE THE SAME DEFINED MEANINGS IN THIS OPTION AGREEMENT.
I. NOTICE OF STOCK OPTION GRANT
- ----------------------
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Date of Grant
Vesting Commencement Date
Exercise Price per Share $
Total Number of Shares Granted
Total Exercise Price $
Type of Option: Incentive Stock Option
Nonstatutory Stock Option
Term/Expiration Date:
VESTING SCHEDULE:
This Option shall be exercisable, in whole or in part, according to the
following vesting schedule:
One-half of the Shares subject to the Option shall become exercisable
upon the one year anniversary of the Vesting Commencement Date, and an
additional one-twenty-fourth (1/24)
-14-
<PAGE> 15
of the Shares subject to the Option shall become exercisable each full month
thereafter, subject to Optionee's continuing to be a Service Provider on such
dates.
TERMINATION PERIOD:
This Option shall be exercisable for two months after Optionee ceases
to be a Service Provider. Upon Optionee's death or disability, this Option may
be exercised for such longer period as provided in the Plan. In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 14(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. Nevertheless, to the extent that it
exceeds the $100,000 rule of Code Section 422(d), this Option shall be treated
as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the applicable provisions of the Plan and this Option Agreement.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as Exhibit A (the "Exercise
Notice") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option
unless such issuance and such exercise complies with Applicable laws. Assuming
such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
-15-
<PAGE> 16
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares have not been
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if required by the Company, concurrently with
the exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B.
4. LOCK-UP PERIOD. Optionee hereby agrees that, if so requested by the
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
-16-
<PAGE> 17
8. TERM OF OPTION. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF ISO. If this Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) EXERCISE OF ISO FOLLOWING DISABILITY. If the Optionee
ceases to be an Employee as a result of a disability that is not a total and
permanent disability as defined in Section 22(e)(3) of the Code, to the extent
permitted on the date of termination, the Optionee must exercise an ISO within
three months of such termination for the ISO to be qualified as an ISO.
(c) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability upon the exercise of a Nonstatutory Stock
Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an Employee or a former Employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
(d) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax purposes. In the
case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
-17-
<PAGE> 18
(e) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
10. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of Nevada.
11. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
-18-
<PAGE> 19
OPTIONEE: ___________________ REVENGE MARINE, INC.
- ------------------------------------ -----------------------------------
William C. Robinson, President and CEO
- ------------------------------------
- ------------------------------------
Residence Address
-19-
<PAGE> 20
EXHIBIT A
---------
1998 INCENTIVE STOCK PLAN
EXERCISE NOTICE
Revenge Marine, Inc.
2051 NW 11th St.
Miami, FL 33125
Attention: Secretary
I. EXERCISE OF OPTION. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Revenge Marine, Inc. (the
"Company") under and pursuant to the 1998 Incentive Stock Plan (the "Plan") and
the Stock Option Agreement dated __________, 19 (the "Option Agreement").
I. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.
I. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
I. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares shall be issued to
the Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
I. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
I. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
A. LEGENDS. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon
1
<PAGE> 21
any certificate(s) evidencing ownership of the Shares together with any other
legends that may be required by the Company or by state or federal securities
laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF
COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES,
SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE
SHARES.
STOP-TRANSFER NOTICES. Optionee agrees that, in order
to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Agreement shall be
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
2
<PAGE> 22
GOVERNING LAW; SEVERABILITY. This Agreement is governed by the
internal substantive laws but not the choice of law rules, of Florida.
ENTIRE AGREEMENT. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option Agreement
and the Investment Representation Statement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by both parties.
Submitted by: Accepted by:
OPTIONEE: REVENGE MARINE, INC.
-------------------
- ----------------------------------- -----------------------------------
William C. Robinson, President and CEO
- ------------------------------------
- ------------------------------------
Residence Address
3
<PAGE> 23
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: _________
COMPANY: REVENGE MARINE, INC.
SECURITY: COMMON STOCK
AMOUNT: 9797
DATE: 12/15/98
The Optionee agrees and represents to the following in connection with
the purchase of the Company's Securities: Optionee is aware of the Company's
business affairs and financial condition and has acquired sufficient information
about the Company to reach an informed and knowledgeable decision to acquire the
Securities. Optionee is acquiring these Securities for investment for Optionee's
own account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of the grant of the Option to the Optionee, the exercise will be exempt
from registration under
-1-
<PAGE> 24
the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than one year after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than two years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
Optionee further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
Signature of Optionee:
-------------------------------------
Date:__________________________, 19___
2
<PAGE> 1
EXHIBIT 10.4
TERMINATION AND REPLACEMENT AGREEMENT
dated as of June 30, 1999
between
REVENGE MARINE, INC.
and
BYC ACQUISITION CORPORATION
<PAGE> 2
Index
-----
1. Termination and Replacement...........................................1
2. Warrant...............................................................2
3. Fees..................................................................5
4. Representations and Warranties of Revenge.............................6
5. Representations and Warranties of BYC.................................8
6. Covenants.............................................................8
7. Legend................................................................9
8. Fees and Expenses....................................................10
9. Indemnification......................................................10
10. Survival of Representations, Warranties, Etc.........................12
11. Notices..............................................................12
12. Miscellaneous........................................................12
Definitions
-----------
Agreement.................. 1 NASDAQ.................... 8
Assumed Liabilities........ 1 Purchase Agreement........ 1
BYC........................ 1 Revenge................... 1
Common Stock............... 2 Revenge Delaware.......... 1
Exchange Act............... 7 SEC....................... 3
Exercise Date.............. 6 Warrant................... 2
Indemnified Party.......... 11 Warrant Shares............ 2
Indemnifying Party......... 11
<PAGE> 3
TERMINATION AND REPLACEMENT AGREEMENT
This Replacement Agreement (the "Agreement") dated June 30, 1999, is
entered into by and between Revenge Marine, Inc., a Nevada corporation
("Revenge"), and BYC Acquisition Corporation, a Delaware corporate ("BYC").
Recitals
--------
A. BYC and Revenge Marine, Inc., a Delaware corporation ("Revenge
Delaware") consummated the purchase and sale of substantially all of the assets
of BYC, and the transfer and assumption of certain of the liabilities of BYC,
pursuant to a Purchase Agreement dated October 22, 1998 (the "Purchase
Agreement").
B. Revenge Delaware has assigned to Revenge, its corporate parent, all
of its rights and obligations under the Purchase Agreement and the warrant
issued in connection therewith.
B. The parties desire to replace their remaining rights and obligations
under the Purchase Agreement with the rights and obligations contained in this
Agreement.
The parties hereto agree as follows:
1. Termination and Replacement.
----------------------------
(a) The Purchase Agreement is hereby terminated, and neither party will
have any further rights or obligations thereunder. In connection with such
termination, the parties acknowledge the following:
(1) BYC's right to receive, and Revenge's obligation to
pay, the fees described in Sections 1(c) and 4 of the
Purchase Agreement, including amounts accrued
thereunder, is hereby terminated.
(2) BYC is simultaneously surrendering to Revenge the
warrant described in Section 1(b) of the Purchase
Agreement for cancellation.
(3) Revenge hereby grants, bargains, sells, transfers,
assigns and delivers to BYC all of its obligations
with respect to the Assumed Liabilities (as defined
in the Purchase Agreement), and BYC hereby agrees to
assume, perform, and discharged the Assumed
Liabilities.
(b) In consideration of the termination of the Purchase Agreement, and
in replacement of the rights and obligations described above:
(1) Revenge shall pay BYC the fees described in Section 3
of this Agreement.
1
<PAGE> 4
(2) Revenge is simultaneously issuing to BYC 1,206 shares
of its Series B Cumulative Convertible Preferred
Stock pursuant to a separate stock purchase
agreement.
(3) Revenge is simultaneously issuing to BYC a warrant
(the "Warrant") to purchase up to 1,500,000 shares
(subject to adjustment) of Revenge's Common Stock,
par value $0.001 per share (the "Common Stock"), at
an exercise price of $0.37 per share (subject to
adjustment).
2. WARRANT. This section describes certain provisions specific to the Warrant
and the shares of Common Stock that BYC may from time to time acquire upon
exercise of the Warrant (the "Warrant Shares"):
(a) DEMAND REGISTRATION. Upon BYC's written request in accordance with
Section 2(c) any time on or after the first anniversary of the first exercise of
the Warrant Shares but before the fourth anniversary of such exercise, Revenge
will use reasonable efforts to register under the Securities Act any Warrant
Shares, as soon as reasonably practicable following such request so as to permit
the sale of such shares. Revenge will be entitled to postpone for a reasonable
period of time, the filing of any registration statement otherwise required to
be prepared and filed by it with respect to such registration if, at the time it
receives such request, Revenge (i) in its reasonable judgment and based on the
advice of counsel, determines that such registration and sale would materially
interfere with any financing, acquisition, corporate reorganization or other
material transaction and promptly gives BYC written notice of such
determination, or (ii) has filed or is about to file a registration statement
relating to Revenge's securities and the managing underwriters of such offering
have advised in writing that the filing of a registration statement would
materially and adversely affect Revenge's offering. If Revenge so postpones a
registration statement filing, then BYC may withdraw the request for
registration by giving Revenge written notice within 30 calendar days after
receipt of the notice of postponement. Revenge will have no further obligation
to register any Warrant Shares under this Section 2(a) after it has filed two
separate registration statements that have become effective pursuant to requests
by BYC under this Section 2(a).
(b) PIGGYBACK REGISTRATION. At any time after an initial public
offering of shares, if Revenge proposes to register under the Securities Act any
of its Common Stock or other securities convertible into Common Stock relating
to an underwritten public sale of such securities, it will at each such time
give written notice to BYC of its intention to do so, together with reasonable
details regarding such proposed registration and sale. Upon BYC's written
request in accordance with Section 2(c) made within 15 days after the receipt of
any such notice, Revenge will use reasonable efforts to include in such
registration the number of Warrant Shares requested by BYC. Notwithstanding the
foregoing, Revenge will not be required to provide BYC notice of, and BYC will
not have any right to have Warrant Shares included in, (i) a registration of
securities solely in connection with any plan for the acquisition of securities
by employees of Revenge or any dividend reinvestment plan, (ii) a registration
on Form S-4 or similar form or (iii) a registration of securities solely in
connection with the acquisition of a business. Revenge's obligations under this
Section 2(b) are subject to the following conditions:
2
<PAGE> 5
(1) If at any time after giving written notice of its intention to
register any securities under this Section 2(b) and prior to
the effective date of the registration statement filed in
connection with such registration, Revenge determines for any
reason not to register such securities, Revenge will give BYC
written notice of such determination and, thereupon, will be
relieved from its obligation to proceed with such
registration.
(2) If the managing underwriter advises Revenge in writing that,
in its opinion, the amount of securities to be offered should
be limited in order to assure a successful offering, the
amount of Warrant Shares to be included in such registration
will be limited and will be allocated among the persons
selling such securities in the following order of priority:
(i) first to be registered will be the securities Revenge
proposes to sell, and (ii) next to be registered will be the
Warrant Shares and any other Common Stock subject to similar
piggyback registration rights granted by Revenge, in
proportion, as nearly as practicable, to the number of Common
Stock desired and eligible to be sold by each holder of such
Common Stock.
(c) FORM OF BYC REQUEST. Each BYC request for registration under
Section 2(a) or (b) will (i) specify the number of Warrant Shares intended to be
offered and sold, and (ii) describe the intended method of disposition of such
Warrant Shares.
(d) REGISTRATION EXPENSES. Revenge will pay all registration expenses
in connection with any registration of Warrant Shares under Section 2(a) or (b).
The registration expenses referred to in the preceding sentence include, without
limitation, the fees and expenses of Revenge's counsel and accountants, the
costs and expenses incident to the preparation, printing and filing by Revenge
of the registration statement (including the financial statements included in,
and all amendments and exhibits to, the registration statement), the preliminary
prospectus and the final prospectus and any amendment or supplement to any of
the foregoing, the filing fees of the Securities and Exchange Commission (the
"SEC"), the National Association of Securities Dealers, Inc., and of any state
securities or blue sky authorities, the fees and expenses of counsel in
connection with the qualification of the securities under state securities or
blue sky laws, the costs of printing and copying the various underwriting and
blue sky documents, any fees relating to the listing of the securities on the
National Association of Securities Dealers, Inc. Automated Quotation System or
in any other market in which Revenge's securities are traded, the cost of
printing certificates representing the securities being offered, any fees of the
transfer agent, the cost of preparing and publishing advertisements, including
"tombstone" advertisements, relating to the offering, and the cost of preparing
bound volumes relating to the offering; provided, however, that BYC and Revenge
shall share equally all costs of printing and delivering preliminary and final
prospectuses in connection with any registration of Warrant Shares under Section
2(a). BYC will be solely responsible for any underwriting discounts or
commissions applicable to its securities sold in the offering. Notwithstanding
the foregoing, Revenge and BYC will in good faith discuss BYC sharing a pro rata
portion of the offering expenses in connection with any registration of Warrant
Shares under Section 2(a) or (b) if such sharing is required to effect the
registration of securities in a particular jurisdiction and the managing
underwriter advises Revenge in writing that, in its opinion, the registration of
securities in that jurisdiction is necessary to assure a successful offering.
3
<PAGE> 6
(e) REGISTRATION PROCEDURES. If and whenever Revenge is required to use
reasonable efforts to effect the registration of any Warrant Shares under the
Securities Act as provided in Sections 2(a) and (b), Revenge will promptly:
(1) prepare and file with the SEC a registration statement with
respect to such Warrant Shares and use reasonable efforts to
cause such registration statement to become effective;
(2) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such
registration statement effective for a period up to 180 days
and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
registration statement until such time as all of such
securities have been disposed of in accordance with the
intended methods of disposition by BYC as set forth in such
registration statement;
(3) furnish to BYC such number of conformed copies of such
registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such
number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the
requirements of the Securities Act, and such other documents,
as BYC may reasonably request in order to facilitate the
disposition of the Warrant Shares by BYC; provided, however,
that BYC and Revenge shall share equally all costs of printing
and delivering preliminary and final prospectuses in
connection with any registration of Warrant Shares under
Section 2(a);
(4) use its reasonable efforts to register or qualify such
securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as BYC
may reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to
enable BYC to consummate the disposition in such jurisdictions
of the Warrant Shares owned by BYC, except that Revenge will
not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to consent to general
service of process in any such jurisdiction;
(5) notify BYC at any time when a prospectus relating to its
Warrant Shares is required to be delivered under the
Securities Act of the happening or any event as a result of
which the prospectus included in such registration statement,
as then in effect, is known by Revenge to include an untrue
statement of material fact or to omit to state any material
fact required to be stated therein or necessary to make
statements therein not misleading in the light of the
circumstances then existing (provided that the period during
which such a condition may occur shall not be permitted by the
Company to persist for longer than 30 days nor shall two or
more
4
<PAGE> 7
such periods be permitted by the Company to persist for an
aggregate of longer than 60 days during the term of such
registration), and promptly prepare, file and furnish to BYC a
reasonable number of copies of a supplement to, or an
amendment of, such prospectus as may be necessary so that, as
delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
and
(6) advise BYC as to the time when such registration statement
becomes effective and as to the issuance by the SEC of any
stop order suspending the effectiveness of such registration
statement or the institution of any proceedings for that
purpose, and use reasonable efforts to prevent the issuance of
any such stop order and to obtain as soon as possible the
lifting thereof, if issued.
BYC will furnish to Revenge such information regarding BYC and the distribution
of the Warrant Shares as Revenge may from time to time reasonably request.
(f) TAG-ALONG RIGHTS. If at any time Revenge proposes to sell
securities representing, or convertible into or exchangeable for, more than 20%
of its then outstanding Common Stock to a third party, other than pursuant to a
registered public offering under the Securities Act or a bona fide business
acquisition, then Revenge will give written notice to BYC. BYC may, upon giving
written notice to Revenge within 20 business days after receipt of Revenge's
notice, participate in such sale at the same price and upon the same terms and
conditions as are applicable to Revenge in such transaction. BYC may sell up to
the lesser of (i) one third of the total number of shares proposed to be sold by
Revenge, or (ii) all of the Warrant Shares. If BYC gives timely notice under
this Section 2(f), then Revenge will require as a condition precedent to
consummating the purchase of shares from Revenge, that the purchaser purchase
the Warrant Shares that BYC is entitled to sell under this Section 2(f), and
Revenge will not complete its sale to the purchaser if the purchaser fails to
satisfy such condition. The purchaser's purchase of the Warrant Shares be on
terms no less favorable than those set forth in Revenge's notice. referred to in
the second preceding sentence.
(g) RESTRICTIONS ON BYC'S RIGHTS. Notwithstanding any provision of this
Section 3, BYC shall not have any demand registration rights under Section 3(a)
or tag-along rights under Section 2(f) at any time in which BYC could sell the
Warrant Shares it holds under Rule 144 or in another transaction exempt from
registration during the following 180 days.
3. Fees.
-----
(a) Revenge will pay BYC a fee of 1% of its total revenues from all
Blackfin Sales sources for the period from April 1, 1999 to June 30, 1999 and 1%
of its total revenues from June 30, 1999 to April 30, 2002 Not to include the
sale of the assets listed in the security agreement with Finova Capital. The fee
will be due and payable quarterly by wire transfer to BYC's designated account
in United States dollars or acceptable securities within 30 days following each
calendar quarter during the applicable term, beginning with the year ending June
5
<PAGE> 8
30, 1999. Revenge will simultaneously with each such payment furnish BYC the
quarterly financial statements described in Section 6(e), together with such
other information as BYC may from time to time reasonably request.
(b) Revenge will maintain complete, clear and accurate records in
sufficient detail to enable the fees payable under this Section 3 to be
determined or audited, and Revenge will retain such records, and make them
available for inspection at any time, for a period of four years. BYC may
designate independent certified public accountants reasonably acceptable to
Revenge to audit, on a confidential basis, any fee certificates delivered or due
to BYC pursuant to this Section 3, provided that no more than two such audits
may be conducted during any 12-month period. Revenge will give the accountants
reasonable access to its facilities, as well as the opportunity to inspect at
such facilities all records that are reasonably necessary for the accountants to
determine if the fees have been properly calculated. The accountants will not
disclose any financial information but will only state that the calculated fees
were correct or that Revenge has correctly paid, overpaid or underpaid the fees.
If the accountants determine that Revenge has underpaid the fees, then Revenge
will promptly pay BYC the amount of the underpayment, together with interest
calculated from the date such amount was originally due at the rate of 12% per
annum or the maximum amount permitted by applicable law, if lower, by wire
transfer to BYC's designated account in United States dollars. If the accountant
determines that Revenge has overpaid the fees, then Revenge will receive a
credit in the amount of such overpayment on its next quarterly payment. BYC will
bear the costs of the audit unless the accountants determine that Revenge has
underpaid the fees by ten percent or more, in which case Revenge will bear such
costs.
4. REPRESENTATIONS AND WARRANTIES OF REVENGE. Revenge hereby represents and
warrants to BYC on the date hereof and on each Exercise Date (as defined in the
Warrant) as follows:
(a) Revenge has been duly incorporated and is validly existing in good
standing under the laws of State of Nevada.
(b) The execution, delivery and performance of this Agreement and the
Warrant by Revenge have been duly authorized by all requisite corporate action;
and no further consent or authorization of Revenge, its Board of Directors or
its stockholders is required. This Agreement and the Warrant have been duly
executed and delivered by Revenge and, when duly authorized, executed and
delivered by BYC, will be valid and binding agreements, enforceable against
Revenge in accordance with their terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to general principles of equity.
(c) Revenge has full corporate power and authority necessary to execute
and deliver this Agreement and the Warrant and to perform its obligations
hereunder and thereunder.
(d) No consent, approval, authorization or order of any court,
governmental agency or other body is required for execution and delivery by
Revenge of this Agreement or the Warrant or the performance by Revenge of any of
its obligations hereunder or thereunder, other than,
6
<PAGE> 9
with respect to any Exercise Date, any consent, approval, authorization or order
which is received on or prior to such date.
(e) Neither the execution and delivery by Revenge of this Agreement or
the Warrant nor the performance by Revenge of any of its obligations hereunder
or thereunder:
(1) violates, conflicts with, results in a breach of, or
constitutes a default (or an event which with the giving of
notice or the lapse of time or both would be reasonably likely
to constitute a default) under (i) the Certificate of
Incorporation or by-laws of Revenge or any of its subsidiaries
or any Certificate of Designation relating to any securities
of Revenge or any of its subsidiaries, (ii) any decree,
judgment, order, law, treaty, rule, regulation or
determination of which Revenge is aware (after due inquiry) of
any court, governmental agency or body, or arbitrator having
jurisdiction over Revenge or any of its subsidiaries or any of
their respective properties or assets, (iii) the terms of any
bond, debenture, note or any other evidence of indebtedness,
or any agreement, stock option or other similar plan,
indenture, lease, mortgage, deed of trust or other instrument
to which Revenge or any of its subsidiaries is a party, by
which Revenge or any of its subsidiaries is bound, or to which
any of the properties or assets of Revenge or any of its
subsidiaries is subject, (iv) the terms of any "lock-up" or
similar provision of any underwriting or similar agreement to
which Revenge or any of its subsidiaries is a party or (v) any
rules of the National Association of Securities Dealers, Inc.
applicable to Revenge or the transactions contemplated hereby;
or
(2) results in the creation or imposition of any lien, charge or
encumbrance upon (i) the Warrant or (ii) any of the properties
or assets of Revenge or any of its subsidiaries.
(f) Revenge has authorized and reserved 1,500,000 shares of Common
Stock for issuance upon exercise of the Warrants. When issued to BYC against
payment therefor in accordance with the terms of the Warrant, each Warrant Share
(i) will have been duly and validly authorized, duly and validly issued, fully
paid and nonassessable; (ii) will be free and clear of any security interests,
liens, claims or other encumbrances; and (iii) will not have been issued or sold
in violation of any preemptive or other similar rights of the holders of any
securities of Revenge.
(g) There is no pending or, to the best knowledge of Revenge,
threatened action, suit, proceeding or investigation before any court,
governmental agency, self regulatory agency, or body, or arbitrator having
jurisdiction over Revenge or any of its affiliates that would materially
adversely affect Revenge, or the execution or performance of its obligations
under this Agreement or the Warrant.
(h) Revenge has timely filed all filings with the SEC under the
Securities Act or the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), required to be filed by Revenge pursuant to such Acts, and no
such filing, or press release containing information material to the business of
Revenge as a whole, contained any untrue statement of a material fact or omitted
to state any material fact
7
<PAGE> 10
necessary in order to make the statements, in the light of the circumstances
under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF BYC. BYC hereby represents and warrants to
Revenge on the date hereof as follows:
(a) BYC has been duly incorporated and is validly existing in good
standing under the laws of State of Delaware.
(b) The execution, delivery and performance of this Agreement by BYC
have been duly authorized by all requisite corporate action; and no further
consent or authorization of BYC, its Board of Directors or its stockholders is
required. This Agreement has been duly executed and delivered by BYC and, when
duly authorized, executed and delivered by Revenge, will be a valid and binding
agreement, enforceable against BYC in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(c) Subject to Section 2, BYC understands that the Warrant and the
Warrant Shares have not been registered under the Securities Act and may not be
re-offered or resold other than pursuant to such registration or an available
exemption therefrom.
(d) BYC is an "accredited investor" as that term is defined in
Regulation D. BYC is acquiring the Warrant for its own account for investment
only and not with a view to, or for resale in connection with, the public sale
or distribution thereof except pursuant to sales registered under the Securities
Act or an exemption from registration thereunder.
6. COVENANTS. Revenge covenants and agrees with BYC as follows:
(a) Following an initial public offering of Common Stock and for so
long as any portion of the Warrant remains outstanding, Revenge will use
reasonable efforts to (i) maintain the eligibility of the Common Stock for
quotation on NASDAQ National Market ("NASDAQ") or listing on a national or
regional securities exchange (as defined in the Exchange Act) and (ii) use
reasonable efforts to regain the eligibility of the Common Stock for quotation
on NASDAQ in the event that the Common Stock is delisted by NASDAQ or national
or regional securities exchange.
(b) Revenge will (i) provide BYC with an opportunity to review and
comment on any public disclosure by Revenge of information regarding this
Agreement and the transactions contemplated hereby, (ii) promptly notify BYC if
there is any public disclosure by Revenge of material information regarding
Revenge or its financial condition, prospects or results of operation and (iii)
provide BYC with copies of all registration statements, annual reports,
quarterly reports, proxy materials and other filings with the SEC, NASDAQ and
any national or regional securities exchange on which the Common Stock is
listed.
(c) Revenge will comply with the terms and conditions of the Warrant as
set forth in the Warrant (as duly amended from time to time by the parties
hereto).
8
<PAGE> 11
(d) For so long as any portion of the Warrant remains outstanding,
Revenge will at all times reserve and keep available, free from preemptive
rights, out of its authorized but unissued Common Stock, for issuance upon
exercise of such Warrant, the maximum number of Warrant Shares then so issuable.
If at any time the number of authorized but unissued shares of Common Stock is
not sufficient to effect the exercise of the Warrant for all the Warrant Shares
issuable thereunder, Revenge shall use reasonable efforts to increase its number
of authorized shares of Common Stock to such number of shares as shall be
sufficient to effect such exercise, including causing its Board of Directors to
call a meeting of stockholders and recommending such increase, and after
obtaining any such approval Revenge shall reserve for issuance to BYC the number
of shares of Common Stock required to effect such exercise.
(e) Revenge will furnish BYC financial statements as follows: (i)
within 30 days after the end of each calendar quarter, financial statements
prepared and certified by management, and (ii) within 90 after the end of each
fiscal year, audited financial statements, prepared by certified public
accountants of national standing. The financial statements provided by Revenge
under this subsection (e) will be prepared in accordance with generally accepted
accounting principles, consistently applied, and will include all balance
sheets, cash flows and earnings statements, and other financial information
which BYC may from time to time reasonably request.
(f) As long as the Warrant or any Warrant Shares are outstanding,
unless BYC otherwise consents in advance in writing:
(1) Revenge will continue to engage in business of the same
general type as conducted on the closing date and do or cause
to be done all things necessary to preserve, renew and keep in
full force and effect its legal existence and the rights,
licenses, permits, privileges and franchises material to the
conduct of its business.
(2) Revenge will not convey, sell, lease, assign, transfer or
otherwise dispose of any of its property, business or assets,
whether now owned or hereafter acquired, other than in the
ordinary course of business other than the manufacturing
assets know as Blackfin and Egret and Consolidated.
(3) Revenge will not enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service, with any affiliate
unless such transaction is (a) in the ordinary course of
Revenge's and such affiliate's business and (b) upon fair and
reasonable terms no less favorable to Revenge than it would
obtain in a comparable arm's length transaction with a person
which is not an affiliate.
7. LEGEND. BYC understands that the certificates or other instruments
representing the Warrant and, until such time as the Warrant Shares shall have
been sold pursuant to a registration under the Securities Act as contemplated by
this Agreement, the stock certificates representing the Warrant Shares shall
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such certificates or other
instruments):
9
<PAGE> 12
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
SAID ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS.
The legend set forth above shall be removed and Revenge shall issue a
certificate without such legend to any holder of the Warrant Shares if, unless
otherwise required by state securities laws, (i) the same are sold pursuant to
an effective registration statement under the Securities Act, or (ii) in
connection with a sale transaction, such holder provides Revenge with an opinion
of counsel, in form, substance and scope reasonably acceptable to Revenge, to
the effect that a public sale, assignment or transfer thereof maybe lawfully
effected without registration under the Securities Act, or (iii) such holder
provides Revenge with assurances reasonably satisfactory to Revenge that the
same may be publicly sold pursuant to Rule 144 without restriction.
8. FEES AND EXPENSES. Except as otherwise provided in this Agreement or the
Warrant, each party will be bear its own legal fees and expenses incurred in
connection with preparing this Agreement and the related transactions.
9. INDEMNIFICATION.
(a) INDEMNIFICATION OF BYC. Revenge hereby agrees to indemnify BYC and
each of its officers, directors, employees, agents and affiliates and each
person that controls (within the meaning of Section 20 of the Exchange Act) any
of the foregoing persons against any claim, demand, action, liability, damages,
loss, cost, settlement, disposition or expense (including, without limitation,
reasonable legal fees and reasonable investigation expenses), that it incurs in
connection with:
(1) any material breach of or failure to perform any covenant,
agreement or obligation of Revenge made in this Agreement or
the Warrant;
(2) any material inaccuracy in or material breach of the
representations and warranties of Revenge made in this
Agreement or the Warrant; or
(3) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement,
prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus filed by or on behalf of
Revenge, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading; except to the
extent that any such claim, demand, action, liability,
damages, loss, cost, settlement, disposition or expense arises
out of or is based upon an untrue
10
<PAGE> 13
statement or alleged untrue statement or omission or alleged
omission made in any such document or amendment or supplement
thereto, in reliance upon and in conformity with written
information furnished to Revenge by, or on behalf of, BYC
specifically for use therein.
(b) INDEMNIFICATION OF REVENGE. BYC hereby agrees to indemnify Revenge
and each of its officers, directors, employees, agents and affiliates and each
person that controls (within the meaning of Section 20 of the Exchange Act) any
of the foregoing persons against any claim, demand, action, liability, damages,
loss, cost, settlement, disposition or expense (including, without limitation,
reasonable legal fees and reasonable investigation expenses), that it incurs in
connection with:
(1) any material breach of or failure to perform any covenant,
agreement or obligation of BYC made in this Agreement or the
Warrant;
(2) any material inaccuracy in or material breach of the
representations and warranties of BYC made in this Agreement
or the Warrant; or
(3) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement,
prospectus, or any amendment or supplement thereto, or any
related preliminary prospectus filed by or on behalf of
Revenge, or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the to
the extent that any such claim, demand, action, liability,
damages, loss, cost, settlement, disposition or expense arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any such
document or amendment or supplement thereto, in reliance upon
and in conformity with written information furnished to
Revenge by, or on behalf of, BYC specifically for use therein.
(c) CONDUCT OF CLAIMS. Whenever a claim for indemnification arises
under this Section 9, the party seeking indemnification (the "Indemnified
Party") will notify the party from whom such indemnification is sought (the
"Indemnifying Party") in writing of the relevant event or proceeding and the
facts constituting the basis for such claim in reasonable detail. Upon delivery
of such notice, such Indemnified Party will take all reasonable steps to
mitigate any losses, liabilities, costs, charges and expenses relating to any
such event or proceeding. Such Indemnifying Party shall have the right to retain
counsel of its choice in connection with such event or proceeding and to
participate at its own expense in the defense of any such event or proceeding.
An Indemnifying Party will not, without the prior written consent of the
applicable Indemnified Parties (which consent may not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification could be sought under this Section 9 unless such settlement,
compromise or consent (i) includes an unconditional release of each Indemnified
Party from all liability arising out of such litigation, investigation,
proceeding or claim and (ii)
11
<PAGE> 14
does not include a statement constituting an admission of fault, culpability or
a failure to act by or on behalf of any Indemnified Party.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. The respective
representations, warranties, and agreements made herein by or on behalf of the
parties hereto will remain in full force and effect, regardless of any
investigation made by or on behalf of the other party to this Agreement or any
officer, director or employee of, or person controlling or controlled by or
under common control with, such party and will survive delivery of and payment
for the Warrant and any Warrant Shares.
11. NOTICES. All communications hereunder will be in writing, and will be
delivered by hand, sent by registered mail or transmitted and confirmed by
facsimile
If to Revenge: Revenge Marine, Inc.
2051 NW 11th
Miami, Florida 33125
Fax: (305) 643-0393
Attention: William Robinson, President
If to BYC: BYC Acquisition Corporation
c/o Detroit Diesel Corporation
13400 Outer Drive, West
Detroit, Michigan 48239-4001
Fax: (313) 592-7323
Attention: Daniel J. McEnroe, Treasurer
12. MISCELLANEOUS.
(a) This Agreement may be executed in one or more counterparts and it
is not necessary that signatures of all parties appear on the same counterpart,
but such counterparts together shall constitute but one and the same agreement.
(b) This Agreement and the Warrant shall inure to the benefit of and be
binding upon the parties hereto, their respective successors and assigns and,
with respect to Section 9 hereof, their respective officers, directors,
employees, agents, affiliates and controlling persons, and no other person shall
have any right or obligation hereunder. BYC may not transfer its rights and
obligations under this Agreement or the Warrant without Revenge's prior written
consent, which may not be unreasonably withheld or delayed, except that BYC may
transfer its rights and obligations to Detroit Diesel Corporation (or any of its
affiliates) without such consent. Revenge may not assign its rights or
obligations under this Agreement or the Warrant.
(c) This Agreement and the Warrant shall be governed by, and construed
in accordance with, the internal laws of the State of Michigan, and each of the
parties hereto hereby submits to the non-exclusive jurisdiction of any Federal
court in the Eastern District of Michigan or appropriate State court in Michigan
and any court hearing any appeal therefrom, over any suit, action or proceeding
against it arising out of or based upon this Agreement and the Warrant.
12
<PAGE> 15
Each of the parties hereto hereby waives any objection to any such suit, action
or proceeding in such courts whether on the grounds of venue, residence or
domicile or on the ground that such suit, action or proceeding has been brought
in an inconvenient forum.
(d) The provisions of this Agreement and the Warrant are severable, and
if any clause or provision hereof shall be held invalid, illegal or
unenforceable as a whole or in part, such invalidity or unenforceability shall
not in any manner affect any other clause or provision of this Agreement or the
Warrant.
(e) The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be a part of this
Agreement.
(f) This Agreement and the Warrant constitute the entire agreement and
supersedes all prior agreements and understandings, written or oral, between the
parties hereto with respect to the subject matter of this Agreement and the
Warrant, including the Purchase Agreement. Neither this Agreement nor the
Warrant is intended to confer upon any person other than the parties hereto any
rights or remedies hereunder or thereunder.
(g) As used in this Agreement, the phrase "reasonable efforts" means,
with respect to any action, those reasonable good faith efforts required to
diligently pursue completion of the subject action in a timely manner.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
REVENGE MARINE, INC.
By:
----------------------------------
William Robinson
Its: President
BYC ACQUISITION CORPORATION
By:
----------------------------------
Daniel J. McEnroe
Its: Vice President
13
<PAGE> 1
EXHIBIT 10.5
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. THE EXERCISE OF THIS WARRANT IS SUBJECT TO COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
REVENGE MARINE, INC.
WARRANT TO PURCHASE 1,500,000 COMMON SHARES
THIS CERTIFIES THAT, for value received, BYC Acquisition Corporation is
entitled to subscribe for and purchase 1,500,000 of the fully paid and
nonassessable common shares (as adjusted pursuant to Section 2 hereof, the
"Shares") of Revenge Marine, Inc., a Nevada corporation (the "Company"), at the
price of $0.37 per Share (such price and such other price as shall result, from
time to time, from the adjustments specified in Section 2 hereof is herein
referred to as the "Warrant Price"), subject to the provisions and upon the
terms and conditions hereinafter set forth. Any permitted assignee of this
Warrant, by acceptance hereof, assumes and agrees to the rights and restrictions
set forth herein.
1. TERM. The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time and from time to time from June 30, 1999 (the "Effective
Date") through April 30, 2002.
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The Warrant Price and the
number of Shares issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time, and the Company agrees to provide notice upon the
happening of certain events as follows:
(a) RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, combination or reclassification of securities, change any of the
securities to which purchase rights under this Warrant exist into the same or a
different number of securities of any class or classes, this Warrant shall
thereafter permit the holder hereof (the "Holder") to acquire such number and
kind of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination or reclassification.
If shares of the class of the Company's capital stock for which this Warrant is
being exercised are subdivided or combined into a greater or smaller number of
shares, the Warrant Price shall be proportionately reduced in case of
subdivision of shares or proportionately increased in the case of combination of
shares, in both cases by the ratio which the total number of shares of such
class to be outstanding immediately after such event bears to the total number
of shares of such class outstanding immediately prior to such event.
(b) ADJUSTMENT FOR DIVIDENDS IN SHARES. In case at any time or from
time to time on or after the Effective Date the holders of the common shares of
the Company (or any other shares or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional shares of the
Company by way of dividend, then and in each case, the Holder shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Shares
receivable thereupon, and without payment of any additional
1
<PAGE> 2
consideration therefor, the amount of such other or additional shares of the
Company which such Holder would hold on the date of such exercise had it been
the holder of record of such Shares on the Effective Date and had thereafter,
during the period from the Effective Date to and including the date of such
exercise, retained such shares and/or all other additional shares receivable by
it as aforesaid during such period, giving effect to all adjustments called for
during such period by paragraphs (a) and (b) of this Section 2.
(c) CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
3. NO STOCKHOLDER RIGHTS. This Warrant, by itself as distinguished from the
Shares purchasable hereunder, shall not entitle the Holder to any of the rights
of a shareholder of the Company until the Warrant is exercised and then only as
to the Warrant Shares so purchased.
4. AUTHORIZATION AND RESERVATION OF STOCK. The Company will reserve from its
authorized and unissued common shares a sufficient number of shares to provide
for the issuance of the Shares upon the exercise of this Warrant. Issuance of
this Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing certificates to execute and issue the
necessary certificates for the Shares upon the exercise of this Warrant.
5. EXERCISE OF WARRANT; NET EXERCISE.
(a) EXERCISE OF WARRANT. Subject to compliance with applicable federal
and state securities laws, this Warrant may be exercised in whole or in part by
the Holder at any time by the surrender of this Warrant, together with the
Notice of Exercise and Subscription Agreement attached hereto as Exhibits A and
B, respectively, duly completed and executed, at the principal office of the
Company, accompanied by payment in full of the Warrant Price in cash or by check
with respect to the Shares being purchased. This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Shares issuable upon such exercise shall be treated for all purposes as the
Holder of such Shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full common shares issuable upon such exercise. Upon any
partial exercise of this Warrant, the Company will issue to the Holder a new
warrant for the number of the Shares as to which this Warrant was not exercised.
(b) FRACTIONAL SHARES. No fractional common shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the common shares on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
2
<PAGE> 3
6. TRANSFER OF WARRANT. This Warrant and the rights provided for herein may be
transferred or assigned by the Holder hereof in whole or in part, provided that:
(i) prior written notice is given to the Company and the transferor shall
provide, at the Company's reasonable request, an opinion of counsel reasonably
satisfactory to the Company that such transfer does not require registration
under the Securities Act of 1933, as amended; and (ii) this Warrant may be
transferred by the Holder hereof only to (a) an entity controlled by, which
controls, or which is under common control with the transferor or (b) another
entity which is at the time of transfer, or which becomes immediately
thereafter, a lender to the Company.
7. MISCELLANEOUS. This Warrant shall be governed by the internal laws of the
State of Michigan. The headings in this Warrant are for purposes of convenience
and reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the Holder. All notices and other communications from the Company to the holder
of this Warrant shall be delivered personally or mailed by first class mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing, and if mailed shall be deemed given three days after deposit in the
United States mail. The Company shall pay and hold the Holder harmless from
liability for the payment of fees and expenses (including the reasonable fees
and expenses of counsel) incurred in the enforcement of rights granted to the
Holder under this Warrant.
ISSUED June 30, 1999.
REVENGE MARINE, INC.
By:
--------------------------------
Its:
----------------------------
Accepted and agreed to:
BYC ACQUISITION CORPORATION
By:
---------------------------------------
Its:
-----------------------------------
3
<PAGE> 4
Exhibit A
NOTICE OF EXERCISE
TO: REVENGE MARINE, INC.
1. The undersigned hereby elects to purchase ________________ common
shares, of Revenge Marine, Inc. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said common
shares in the name of the undersigned or in such other name as is specified
below:
--------------------------------------
(Name)
--------------------------------------
(Address)
- -------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
-------------------------------------
Its:
-----------------------------------
(name of purchaser, and title and
signature of authorized person)
<PAGE> 5
Exhibit B
SUBSCRIPTION AGREEMENT
<PAGE> 1
EXHIBIT 10.6
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT. THE EXERCISE OF THIS WARRANT IS SUBJECT TO COMPLIANCE WITH
APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
REVENGE MARINE, INC.
WARRANT TO PURCHASE 250,000 COMMON SHARES
THIS CERTIFIES THAT, for value received, Pete Johnson is entitled to
subscribe for and purchase 250,000 of the fully paid and nonassessable common
shares (as adjusted pursuant to Section 2 hereof, the "Shares") of Revenge
Marine, Inc., a Nevada corporation (the "Company"), at the price of $0.37 per
Share (such price and such other price as shall result, from time to time, from
the adjustments specified in Section 2 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. Any permitted assignee of this Warrant, by acceptance
hereof, assumes and agrees to the rights and restrictions set forth herein.
1. TERM. The purchase right represented by this Warrant is exercisable, in whole
or in part, at any time and from time to time from June 30, 1999 (the "Effective
Date") through April 30, 2002.
2. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The Warrant Price and the
number of Shares issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time, and the Company agrees to provide notice upon the
happening of certain events as follows:
(a) RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, combination or reclassification of securities, change any of the
securities to which purchase rights under this Warrant exist into the same or a
different number of securities of any class or classes, this Warrant shall
thereafter permit the holder hereof (the "Holder") to acquire such number and
kind of securities as would have been issuable as the result of such change with
respect to the securities which were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination or reclassification.
If shares of the class of the Company's capital stock for which this Warrant is
being exercised are subdivided or combined into a greater or smaller number of
shares, the Warrant Price shall be proportionately reduced in case of
subdivision of shares or proportionately increased in the case of combination of
shares, in both cases by the ratio which the total number of shares of such
class to be outstanding immediately after such event bears to the total number
of shares of such class outstanding immediately prior to such event.
(b) ADJUSTMENT FOR DIVIDENDS IN SHARES. In case at any time or from
time to time on or after the Effective Date the holders of the common shares of
the Company (or any other shares or other securities at the time receivable upon
the exercise of this Warrant) shall have received, or, on or after the record
date fixed for the determination of eligible shareholders, shall have become
entitled to receive, without payment therefor, other or additional shares of the
Company by way of dividend, then and in each case, the Holder shall, upon the
exercise hereof, be entitled to receive, in addition to the number of Shares
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional
1
<PAGE> 2
shares of the Company which such Holder would hold on the date of such exercise
had it been the holder of record of such Shares on the Effective Date and had
thereafter, during the period from the Effective Date to and including the date
of such exercise, retained such shares and/or all other additional shares
receivable by it as aforesaid during such period, giving effect to all
adjustments called for during such period by paragraphs (a) and (b) of this
Section 2.
(c) CERTIFICATE OF ADJUSTMENT. Whenever the Warrant Price or number or
type of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the nature of
such adjustment and a brief statement of the facts requiring such adjustment.
3. NO STOCKHOLDER RIGHTS. This Warrant, by itself as distinguished from the
Shares purchasable hereunder, shall not entitle the Holder to any of the rights
of a shareholder of the Company until the Warrant is exercised and then only as
to the Warrant Shares so purchased.
4. AUTHORIZATION AND RESERVATION OF STOCK. The Company will reserve from its
authorized and unissued common shares a sufficient number of shares to provide
for the issuance of the Shares upon the exercise of this Warrant. Issuance of
this Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing certificates to execute and issue the
necessary certificates for the Shares upon the exercise of this Warrant.
5. EXERCISE OF WARRANT; NET EXERCISE.
(a) EXERCISE OF WARRANT. Subject to compliance with applicable federal
and state securities laws, this Warrant may be exercised in whole or in part by
the Holder at any time by the surrender of this Warrant, together with the
Notice of Exercise and Subscription Agreement attached hereto as Exhibits A and
B, respectively, duly completed and executed, at the principal office of the
Company, accompanied by payment in full of the Warrant Price in cash or by check
with respect to the Shares being purchased. This Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
Shares issuable upon such exercise shall be treated for all purposes as the
Holder of such Shares of record as of the close of business on such date. As
promptly as practicable after such date, the Company shall issue and deliver to
the person or persons entitled to receive the same a certificate or certificates
for the number of full common shares issuable upon such exercise. Upon any
partial exercise of this Warrant, the Company will issue to the Holder a new
warrant for the number of the Shares as to which this Warrant was not exercised.
(b) FRACTIONAL SHARES. No fractional common shares will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefor based on the fair market value of
the common shares on the date of exercise as reasonably determined in good faith
by the Company's Board of Directors.
2
<PAGE> 3
6. TRANSFER OF WARRANT. This Warrant and the rights provided for herein may be
transferred or assigned by the Holder hereof in whole or in part, provided that:
(i) prior written notice is given to the Company and the transferor shall
provide, at the Company's reasonable request, an opinion of counsel reasonably
satisfactory to the Company that such transfer does not require registration
under the Securities Act of 1933, as amended; and (ii) this Warrant may be
transferred by the Holder hereof only to (a) an entity controlled by, which
controls, or which is under common control with the transferor or (b) another
entity which is at the time of transfer, or which becomes immediately
thereafter, a lender to the Company.
7. MISCELLANEOUS. This Warrant shall be governed by the internal laws of the
State of Michigan. The headings in this Warrant are for purposes of convenience
and reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the Holder. All notices and other communications from the Company to the holder
of this Warrant shall be delivered personally or mailed by first class mail,
postage prepaid, to the address furnished to the Company in writing by the last
holder of this Warrant who shall have furnished an address to the Company in
writing, and if mailed shall be deemed given three days after deposit in the
United States mail. The Company shall pay and hold the Holder harmless from
liability for the payment of fees and expenses (including the reasonable fees
and expenses of counsel) incurred in the enforcement of rights granted to the
Holder under this Warrant.
ISSUED June 30, 1999.
REVENGE MARINE, INC.
By:
----------------------------------
Its:
---------------------------------
Accepted and agreed to:
PETE JOHNSON
By:
----------------------------------
An Individual
3
<PAGE> 4
Exhibit A
NOTICE OF EXERCISE
TO: REVENGE MARINE, INC.
1. The undersigned hereby elects to purchase ________________ common
shares, of Revenge Marine, Inc. pursuant to the terms of the attached Warrant,
and tenders herewith payment of the purchase price in full.
2. Please issue a certificate or certificates representing said common
shares in the name of the undersigned or in such other name as is specified
below:
--------------------------------------
(Name)
--------------------------------------
(Address)
- -------------------------- --------------------------------------
(Date) (Name of Warrant Holder)
By:
----------------------------------
Its:
----------------------------------
(name of purchaser, and title and
signature of authorized person)
<PAGE> 5
Exhibit B
SUBSCRIPTION AGREEMENT
<PAGE> 1
EXHIBIT 21.1 List of Subsidiaries
Revenge Marine, Inc. a Delaware corporation
Consolidated Marine, Inc. a Florida corporation
Egret Boat Company, a Florida corporation
<PAGE> 1
EXHIBIT 23.1
The Board of Directors and
Stockholders of Revenge Marine, Inc.
We hereby do consent to the inclusion of our independent auditor's
report dated September 10, 1999 in the Revenge Marine, Inc. FORM 10-K, for the
year ended June 30,1999.
CROSS AND ROBINSON
Certified Public Accountants
October 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> SEP-05-1997
<PERIOD-END> JUN-30-1998
<CASH> 102,793
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 60,500
<CURRENT-ASSETS> 339,901
<PP&E> 378,445
<DEPRECIATION> 139,025
<TOTAL-ASSETS> 2,995,804
<CURRENT-LIABILITIES> 314,479
<BONDS> 0
0
0
<COMMON> 6,676
<OTHER-SE> 2,674,649
<TOTAL-LIABILITY-AND-EQUITY> 2,995,804
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (318,932)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (318,932)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 1,000,000
<RECEIVABLES> 2,200,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,260,000
<PP&E> 2,764
<DEPRECIATION> 968
<TOTAL-ASSETS> 3,263,496
<CURRENT-LIABILITIES> 3,458,741
<BONDS> 0
0
108,720
<COMMON> 10,899
<OTHER-SE> (314,864)
<TOTAL-LIABILITY-AND-EQUITY> 3,263,496
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> (4,350,855)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,350,855)
<EPS-BASIC> (0.61)
<EPS-DILUTED> (0.61)
</TABLE>
