UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers Under Section 12(g)
of the Securities Exchange Act of 1934
FREFAX, INC.
----------------------------------------------
(Name of Small Business Issuer in its charter)
FLORIDA 65-0786722
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
270 NW 3rd Court Boca Raton, Florida 33432-3720
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone: (561) 368-1427
------------------------------------------
Securities to be registered under Section 12(g) of the Act:
Title of each class Name of each exchange on which each
to be so registered Class is to be registered
- ------------------------ --------------------------------------------
- NONE -
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
----------------------------
(Title of Class)
<PAGE>
TABLE OF CONTENTS
PART I ................................................................1
ITEM 1. DESCRIPTION OF BUSINESS ................................1
ITEM 2. PLAN OF OPERATION ......................................8
ITEM 3. DESCRIPTION OF PROPERTY ................................9
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT ...........................9
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS ............................11
ITEM 6. EXECUTIVE COMPENSATION.................................12
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS ..................................12
ITEM 8. DESCRIPTION OF SECURITIES .............................12
PART II .............................................................13
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ............................13
ITEM 2. LEGAL PROCEEDINGS .....................................13
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS.....................................14
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES................14
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS..............15
PART F/S..............................................................16
FINANCIAL STATEMENTS............................................16
PART III .............................................................17
ITEM 1. INDEX TO EXHIBITS......................................17
SIGNATURES............................................................18
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
Frefax, Inc. ( the "Company') was incorporated on September 26, 1997
under the laws of the State of Florida under the name of Central Group, Inc. See
Exhibit 2(i) at Page E-1.
The name of the Company was changed to Frefax, Inc. by an amendment to
its Article of Incorporation filed with the Florida Department of State on
September 15, 1998. See Exhibit 2(ii) at page E-5.
The Bylaws of the Company are included as Exhibit 2 (iii) commencing at
Page E-6.
From the date of its incorporation to July 30, 1998, the only
activities undertaken by the Company were two offerings of its common stock to
investors pursuant to Rule 504 of Regulation D as promulgated by the Securities
& Exchange Commission.
On July 30, 1998 the Company entered into a Stock Purchase Agreement
with three individuals who owned all of the stock of Frefax, Inc.,a Canadian
Corporation. See Exhibit 3, Page E-26. This Agreement provided as follows:
(1) The three shareholders of Frefax, Inc. (Canada) owned 10,000,000 shares
of that corporation which was all of the outstanding stock.
(2) Those shareholders agreed to sell all of their stock to Frefax, Inc.
(Florida) in exchange for receiving 10,000,000 shares of
Frefax,Inc.(Florida).
(3) The Agreement was executed July 30, 1998 and 10,000,000 shares of
Frefax, Inc. (Florida) were issued as of that date to the three selling
shareholders. All shares as issued have restrictive legends under Rule
144.
Acting through the brokerage firm of Sierra Brokerage Services, Inc.,
in October, 1998 the Company applied to the NASD pursuant to Rule 5740 and Rule
l5c2-11 under the Securities Exchange Act of 1934, for a listing on the OTC
Bulletin Board. This request was approved on November 4, 1998. The stock symbol
for the Company is: FFAX.
The Company acts solely as a holding company. Other than the
acquisition of the stock of Frefax, Inc. (Canada) as a wholly owned subsidiary,
the Company has had no separate business activities since its formation to the
current date. The Company is in good standing in the State of Florida.
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(b) BUSINESS OF ISSUER
Frefax, Inc. (Canada), the wholly-owned subsidiary of Frefax, Inc.
(Florida), is the only active business entity of the Company. Consequently, the
comments that follow in describing the business of the issuer apply only to
Frefax, Inc. (Canada), (identified hereinafter as "FC").
FC was founded for the purpose of investigating the market for, and
technologies involved in, long distance faxing, with the ultimate goal of
creating a world-wide network, capable of providing unlimited use, flat rate,
fax calling service.
The initial marketing focus is to business entities using long distance
fax services within Canada and the United States.
Product description
The products of FC are a combination of three components:
(1) A master "Black Box";
(2) A slave "Black Box"; and
(3) A Telephone Manager System.
The three components work in concert to create an autonomous system
designed to operate without human input. The system also performs
self-diagnostics and can initiate warm boot procedures from the head office.
The Slave unit is installed at the client's place of business. A single
line installation is performed in less than 30 seconds, and will require no
training for the fax operator. The client continues to use the fax machine(s) as
they always have.
A Master unit is then located in all franchisee and company-operated
regional offices. The Master Unit handles the security and information
processing functions. The Company's proprietary Encryption Technology increases
the security of transmissions, as well as providing a speedy method for dealing
with non-paying clients as the system can be turned "on" or "off" via the Master
Unit.
The Telephone Manager System works in parallel with the Master Unit by
keeping track of all incoming and outgoing calls. Detailed reports can be
created using the powerful database management functions of the Telephone
Manager. The Telephone Manager compiles a daily activity report, which is
transmitted to each client, showing both incoming and outgoing activity.
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The Frefax system does not require a dedicated line nor an Internet
provider or service. In less than 30 seconds the customer is installed and
continues to use the Fax machine in the same manner as before, the only
difference is the absence of monthly long distance charges on the telephone
statement.
Industry and Company Background
The most conservative estimate for the worldwide long distance market
is $110 Billion US. By the year 2000, it is expected that the long distance
telephone market will represent several hundred billion dollars in revenues to
the Telco industry. Of these figures, a recent article in the Economist suggests
that at least 25% is excessive profits, which are a direct result of the
monopolistic condition of the world's telecommunication companies.
For the industry in general, it is estimated that 150 million new phone
lines will be installed worldwide before the end of the century. This additional
capacity is equivalent to the number of lines currently in existence in North
America or currently operating in the UK, France and Germany combined. The
fundamental thrust of the Company's marketing strategy will be to utilize its
own Fax broadcast capabilities and customer lists.
Evans Research Corp. has projected the sales growth of fax machines as
high as 90% per annum through 1998 in Canada. Fax technology is now also found
embedded in computer networks and PC's, as well as mobile/cellular fax systems.
All of these systems share one common feature, the use of telephone company
networks to transmit the Information. While fax technology has brought with it
tremendous productivity gains, this background use of telephone lines has also
been a windfall for the telcos (telephone companies).
Another medium for transmitting information is of course the Internet,
however, there are a number of problems inherent in this type of transmission
(see Competition).
The overall market potential for the FC system is anticipated to be in
excess of $25 billion annually. With a minimal market penetration generating an
assumed client base of 15,000 users. FC would generate revenues of $18 million
annually, resulting in annual profits of $20.8 million.
FC offers cost savings to many high volume long distance fax users.
Currently businesses can obtain discount rates in the neighbourhood of 40% off
peak time of day rates from their long distance providers. Even with the
six-second incremental billing offered for dedicated fax lines, most companies
could unknowingly generate hundreds of dollars per month in long distance fax
charges.
The FC system is unique In that it requires no special phone lines and
does not discriminate between types of Fax machines whether stand alone,
PC-based group I, II or Ill. It does not require any special knowledge or skill
to operate, in fact it's operation is totally transparent to the user, who
simply uses his Fax machine as usual while the FC system operates in the
background.
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Distribution Methods of the Products & Services
Current Situation
All major telephone companies generate profit from their long distance
customer base. The telcos offer no specific `deals' for timely fax service to
the general business customer (other than time-of-day or volume discounts).
Existing telco fax services merely offer billing in six-second increments and
the administration of large fax campaigns for a fee.
FC has developed a product/service with appeal to both an existing
marketplace of fax users, and a new generation of fax users who will surface to
take advantage of this cost effective marketing tool.
o Existing fax users will quickly see the benefit as they are
already sensitive to their faxing costs and are frequently
limited in their faxing abilities due to cost constraints. FC
effectively eliminates these concerns.
o Existing (or new) fax owners who have felt that fax
broadcasting (especially via long distance lines) was simply
beyond their reach from a cost perspective. Rather than
mailing out hundreds of customer contact pieces, which are
very expensive and yield extremely low response rates (1-3%),
these businesses can now contact thousands of prospective
customers for virtually pennies a page. FC will bring mass
marketing to the small, independent business owner at
affordable cost.
Service Description
The FC system will revolutionize the use of fax machines for
telemarketing, customer service and sales & marketing due to the flat fee,
unlimited use feature. The ability to send an unlimited number of faxes (maximum
240/day, but extra increments can be purchased) at a fixed flat rate will be
extremely attractive. The monthly fee is $100, or the customer may elect to
prepay one year in advance for $1,000. Initially, FC will establish a Network of
approximately 27 offices throughout North America, in cities with population
over 600,000 and a high concentration of businesses.
In addition to existing product/service FC plans to introduce follow-on
products which are complimentary with the Telco industry. With our fax customer
volume driving down long distance costs, it is conceivable that FC could expand
into the long distance carrier market in the future.
The company also plans to introduce its Telephone Manager System to its
clients as an effective system for monitoring voice calls, both incoming and
outgoing. This can provide the customer with tailored usage reports, providing
the customer with detailed information not otherwise available and creating
incremental revenue.
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As an extra service, FC will also have the capability of creating the
world's largest Fax database. With this capability, FC would be in a position to
offer list services (offering Fax Lists for sale by industry, region, SIC code
or other characteristic) and Fax campaign services to clients.
Market Segmentation
Canadian and U.S. Corporations and Small Businesses
Companies with large vendor or customer base applications will be
targeted. Examples would include banks, trust companies, insurance companies,
brokerage houses and promotion firms, advertising firms, importers, exporters,
OEMs and distributors. All of these types of business are dependent upon the
reliable and rapid transmission of documentation by fax. FC is a cost effective
fax alternative to their current long distance provider.
Repositioning FC in the minds of its customers as a marketing tool will
be a secondary strategy to justify the acquisition of additional systems within
the organization.
The Telephone Manager feature will offer additional benefits to the
customer which are likely unavailable to the average telco or other fax service
providers' customers.
Retailers and Other Distributors of Fax Machines and Related Products
FC will be approaching retailers and distributors of fax machines and
may, in time, also approach manufacturers. FC is currently in discussions with
Icon Office Solutions (a division of Alco Standard), a major supplier of Ricoh,
Sharp, Canon and Toshiba fax machines. Icon has a 20,000 strong sales staff,
giving FC access to thousands of prospective customers.
Through strategic alliances, retailers and distributors would purchase
a minimum black box inventory (100 units at a cost of $16,000) from FC. Each of
their customers who elects to purchase a box will be charged $250, but this will
be credited back to the customers when they sign up with FC at the rate of
$50/month for 5 months (on monthly service) or credited against the annual
service cost of $1,000.
Other possible strategic partners include firms such as National
Utilities, a reseller of primarily utility services (gas, hydroelectric power,
etc.). Under this arrangement, FC. could be made available to their 5,000
corporate accounts across Canada.
5
<PAGE>
Franchises and Other Outlets
In addition to the Faxback program aimed at end-users for the corporate
outlets, FC intends to develop a franchise network in North America with over
300 associate offices. These associate offices will service smaller regions and
will be offered specialized equipment that will allow them to set up their own
local customer base. Billing will be administered by the franchisee, who will
make an annual license renewal payment to FC. This will generate additional
revenues for the company and will serve to expand the customer base to almost
10% of the North American market very quickly.
All franchisees will make a $40,000 investment in equipment, which will
give them One (1) Master Black Box (the exclusive FC hardware and software) and
Sixty (60) Slave Units to be distributed to their customers. Franchisees should
generate approximately $60,000 in incremental revenue per year from this service
and will pay an annual $20,000 franchise license fee, commencing in year 2.
Successful franchises will be allowed to establish additional franchises.
In this way, FC will develop a well-crossed market, offering "local"
service, local supply and direct sales. Dealers and franchises will be able to
service smaller markets which would not be economical to service through
Frefax's head office. The franchise and dealer systems are suitable for existing
companies who wish to supplement their operation's income with little investment
(other than inventory).
Competition
There are three direct competitors to the service at this time:
o Local Telco and other long distance resellers - offering
time-of-day and volume discounts
o Internet - customers may transmit their own messages at no
cost through the Net
o Other fax service providers - other companies purporting to
offer economical fax sending services
o Local Telcos and Long Distance Resellers - Increasing
competition in the long distance market has certainly reduced
long distance costs, however, it is extremely difficult for
any telco or conventional long distance reseller to compete
with flat rate long distance services such as FC which
purchase block long distance time in tremendous volume.
Individual consumers could not negotiate anywhere near the
favorable rates enjoyed by providers such as FC.
Within the Canadian market, flat Rate Long Distance Providers will also
provide competition as they sell blocks of long distance calling time for a flat
fee to consumers (in fact, FC will be utilizing some of their lines in setting
up this service). Their major disadvantage from the customer's perspective is
the necessity of dialing local access codes and then waiting for a line to dial
the intended recipient's fax number. Most also serve a limited market area, such
that clients cannot contact their entire fax list through a single source.
6
<PAGE>
Over time in the U.S., the company also expects limited competition
from MediaCon, which provides a "least-cost routing service" which automatically
routes calls through the long distance provider offering the best rate. This
service still only amounts to a discount service though, versus unlimited
flat-rate faxing through FC.
o Internet - In some respects, the Internet has offered a cheap
alternate to the use of fax technology, via E-mail systems,
however, these systems specialize in the transmission of
ASCII-type data or software-specific data that is transported
over private networks or among users operating common software
platforms. This means that "messages" sent via one software
platform often arrive as "gibberish" at their destination
point, if the recipient does not have the same software.
Alternatively, messages may be sent in a "plain text" format,
losing much of the impact of the message (logos, graphics,
etc.).
E-Mail faxes require the use of a computer, modem and
software, as well as a subscription to an Internet provider
and a telephone line. They do not offer a solution for the Fax
user who already owns a regular Fax machine or PC type
fax/modem. E-mail Faxing has done nothing to address the needs
of Fax users with ordinary `hard copy' fax machines or
ordinary fax/modem systems. Today, only one small company
offers flat fee Faxing via the Internet.
o Other fax service providers - Competitive threats today come
from Faxlink, owned by a long distance carrier, and Faxnet, a
private service offered over the Internet. Both of these
services lack the ability to allow a customer with a regular
fax machine to access the system. Their systems require the
use of E-mail type faxes, scanned documents or E-faxes on the
originating side.
As for their means of transporting the documents, both systems
use the Internet and are subject to the inherent bottlenecks
and data traps and delays that are common throughout the
system. Confidentiality is also not guaranteed, as anyone on
the Internet is able to intercept a copy of a fax message
(which is unacceptable in the case of sensitive material such
as legal correspondence).
In addition, the company's testing shows the Internet can be unreliable
and unpredictable when it comes to timely delivery of fax messages, yet timely
and reliable delivery is the precise reason why most clients elect to transmit
data and documents by fax. They are also perceived as an "unsecured" way of
transmitting sensitive data (such as legal correspondence) as they are subject
to interception while en-route. In most cases, it is difficult for the sender to
determine whether or not their message was delivered, or when.
In addition, both competitors are seeking distributors and cannot
guarantee delivery of a fax if they have no distributor in the client's calling
area. Once the fax has been initiated trough their systems, there is no feedback
to ensure clients that their fax message was received successfully. These
services likely neglect to report these major product flaws because they assume
over time that they will have full area coverage.
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Advertising and Promotion
FC quite literally intends to use itself to promote itself. Using the
Frefax system, FC will begin a telemarketing program by fax to approximately
1,000 businesses per day, including weekends.
Additionally, every fax message sent across the network to a first-time
recipient would have an additional page tagged onto it which will notify the
recipient of the FC service (as the FC promotion sheet will only be received
once, it will not be perceived as junk fax). This technique will increase the
number of businesses contacted, including those businesses that are not
currently in our own database and can also serve as a testimonial for the
product. Prospective clients can simply contact a customer or suppliers
currently using the system in order to hear first hand, how the company likes
the FC service.
Principal Suppliers
The principal equipment supplier for FC is Bell Canada. Eifron Morris &
Company, Ltd. provides FC with the boxes which facilitate the fax transmission.
Governmental Impact on FC Operations
At this time there is no required government approval of the products
and services offered by FC. Further, there are no direct governmental
regulations that impact the FC business operations.
Research and Development
FC estimates that over the past several years it has expended
substantial funds on research and development activites. None of these costs
were borne directly by customers.
Employees
Currently, FC has hired three (3) full-time employees.
ITEM 2. PLAN OF OPERATION
FC has commenced active business operations as of January, 2000, with
the intent of continuing these operations for the entire calendar year. The plan
of operation from a sales standpoint may be summarized as follows:
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(1) FC uses twenty-seven (27) machines maintained in its offices to send
soliciting messages by fax to various potential subscribers. FC intends
to send 1,000 such fax messages daily, with an anticipated acceptance
of two percent (2%) daily. On the basis of twenty working days per
month, this totals 400 acceptances monthly.
(2) FC also employs one full-time employee as a salesman who does direct
solicitations in person. It is anticipated that this salesman will
secure thirty percent (30%) sales success, which should equal the same
number of subscribers as the mechanical process - 400 acceptances
monthly.
(3) On the basis of 800 sales monthly at a gross revenue figure of $100 per
sale, FC should receive $80,000 in monthly gross revenues. FC
anticipates a fifty percent (50%) return on the gross revenue for a
monthly gross profit of $40,000.
(4) FC expects total monthly operating costs of $20,000, leaving a monthly
net (pre-tax) profit of $20,000.
Based upon the sales plan as outlined above, FC anticipates satisfying
its cash requirements from current operations and should not have to raise
additional funds in the next twelve months.
FC does not plan any additional capital purchases, except for
operational equipment which will be purchased as additional sales dictate. FC
does not expect any significant change in its current base of three employees,
except to hire additional salesman as the need arises.
ITEM 3. DESCRIPTION OF PROPERTY
The Company owns no real property and has no leasehold interests.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons (including any group as defined in Regulation
S-B, Section 228.403) are known to the Company, as the issuer, to be the
beneficial owner of more than five percent of any class of the said issuer's
voting securities:
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<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
Title of Class of Beneficial Owner of Beneficial Owner of Class
- ---------------------- ------------------------------------------ ----------------------------- --------------------
<S> <C> <C> <C>
Common Brigand Capital Corp. 1,010,000 5.19%
120 Adelaide St. West
Suite 1214
Toronto, Ontario M5H 1T1
- ---------------------- ------------------------------------------ ----------------------------- --------------------
- ---------------------- ------------------------------------------ ----------------------------- --------------------
Common V.T. Franzke 1,500,000 7.71
120 Adelaide St. West
Suite 1214
Toronto, Ontario M5H 1T1
- ---------------------- ------------------------------------------ ----------------------------- --------------------
- ---------------------- ------------------------------------------ ----------------------------- --------------------
Common Kim Moser 4,000,000 20.56
Concession 11237
Stauffville, Ontario
Canada
- ---------------------- ------------------------------------------ ----------------------------- --------------------
- ---------------------- ------------------------------------------ ----------------------------- --------------------
Common Sherway Holdings, Ltd. 4,000,000 20.56
c/o Cochrane, Tway & Assoc.
P.O. Box 128
Turks & Caicos, B.W.I.
- ---------------------- ------------------------------------------ ----------------------------- --------------------
- ---------------------- ------------------------------------------ ----------------------------- --------------------
Common Mills Sterling Aerospace, Ltd. 2,000,000 10.28
Concession 11237
Stauffville, Ontario
Canada
- ---------------------- ------------------------------------------ ----------------------------- --------------------
- ---------------------- ------------------------------------------ ----------------------------- --------------------
TOTAL 12,510,000 64.30%
- ---------------------- ------------------------------------------ ----------------------------- --------------------
</TABLE>
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following information lists, as to each class, equity securities
beneficially owned by all directors, and of the directors of the issuer, as a
group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Owner Class
- ---------------------- ---------------------------------------- -------------------------------- -------------------
<S> <C> <C> <C>
Common Debra A. Sauer 500,000 2.57%
Word Quest
7576 Pine Walk Dr. So.
Margate, FL 33063
- ---------------------- ---------------------------------------- -------------------------------- -------------------
- ---------------------- ---------------------------------------- -------------------------------- -------------------
TOTAL 500,000 2.57%
- ---------------------- ---------------------------------------- -------------------------------- -------------------
</TABLE>
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NOTE TO (a) and (b) ABOVE:
As to the beneficial ownership of the securities listed above in (a)
and (b), no such owner has the right to acquire within sixty (60) days or
otherwise, the right to acquire shares from options, warrants, right, conversion
privileges, or similar obligations.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTORS
AND CONTROL PERSONS
(a) IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
Name, Municipality of Residence Age Length of Service
- --------------------------------- --- -------------------------------------
Debra A. Sauer 47 Appointed as President
Margate, FL 33063 and sole Director
October 1, 1997
- --------------------------------- --- -------------------------------------
DEBRA A. SAUER is the President, Secretary and the sole Director of the
Company. She is the owner of Word Quest, a sole proprietorship since 1987,
specializing in providing secretarial services to the business community and
also providing resume services to professionals seeking employment. She is not a
director of any other corporation.
Under Section 3 of ARTICLE III of the Bylaws, the directors serve until
the next annual meeting of the shareholders, at which time directors are elected
by the shareholders. A director is to hold office until his or her successor is
elected. If a director vacates his or her position during that director's
tenure, his or her replacement is filled by a majority of the remaining
directors, of the shareholders if no directors remain.
(b) IDENTIFY SIGNIFICANT EMPLOYEES
Other than the President of the Company, the only other significant
employee is GREG MILLS, who is the Managing Director of Operations for Frefax,
Inc. (Canada), the wholly-owned subsidiary of the Company.
Name, Municipality of Residence Age Length of Service
- -------------------------------- ---- -------------------------------------
Greg Mills 46 Appointed as Managing
Toronto, Ontario Director of Operations
Canada 1996
- -------------------------------- ---- -------------------------------------
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Greg Mills has been with Frefax, Inc. (Canada) since its inception in
September, 1996. Prior to that association he was the founder of Bar Code, Inc.
which is a computer hardware distributor and manufacturer.
ITEM 6. EXECUTIVE COMPENSATION
Debra Sauer, President of the Company receives no compensation.
Likewise, Greg Mills does not receive any salary at this time.
No employee, officer, or director of the Company has any form of
long-term compensation, including ( but not limited thereto) qualified or
non-qualified stock options, warrants, incentive plans, SAR's, stock bonus
plans, retirement plans, or otherwise.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has received loan funds from Brigand Capital Corp., a
Canadian corporation, owned by V.T. Franzke, amounting to $130,274 as of June
30, 1999. Brigand Capital Corp. owns 5.19% of the outstanding stock of the
company and V.T. Franzke individually owns 7.71% of the outstanding stock of the
Company.
FC purchased equipment and services amounting to $90,935 from Mills
Sterling Aerospace, Ltd., a Canadian corporation owning 10.28% of the
outstanding stock of the Company. The President of Mills Sterling Aerospace,
Ltd. is Kim Moser who individually owns 20.56% of the outstanding stock of the
Company.
ITEM 8. DESCRIPTION OF SECURITIES
(1) COMMON STOCK
The Company is authorized to issue fifty million (50,000,000) shares of
voting common stock, each share of stock having one vote, at $0.001 par value.
There are no fixed rights to dividends on the common stock. Dividends
may be paid as authorized by the Board of Directors, in cash, in property, or in
shares of the capital stock of the said corporation.
The State of Florida (FS ss.607.0630) provides that shareholders of a
corporation do not have preemptive rights to acquire the corporation's unissued
shares except to the extent that the articles of incorporation so provide.
ARTICLE X of this Company's articles of incorporation provides:
"The Shareholders of this corporation shall not have
preemptive rights to acquire the corporation's unissued shares."
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The only specific material rights of common shareholders is to elect,
on an annual basis, the directors of the Company. Each shareholder has one vote
for any action brought before the shareholders for approval. There is no
provision for cumulative voting.
The Company has no other class of stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) MARKET INFORMATION
The issuer's common equity has been traded on the OTC Bulletin Board
under the symbol: FFAX. The Company was cleared for trading by the NASD on
November 4, 1998.
Trading Summary:
Quarter Ending High Bid Low Bid
-------------- -------- -------
12/30/98 3.000 .625
3/30/99 1.450 .650
6/30/99 1.250 .310
9/30/99 .370 .210
12/30/99 .070 .050
NOTE: The source for the high and low bid information as listed above
is: Interactive Data Corp.
The quotations as listed above pertain to the over-the-counter market.
These quotations reflect inter-dealer prices without retail mark-up, mark-down
or commission and may not represent actual transactions.
The approximate number of holders of the common voting stock, the only
class of stock authorized by the Company, is: 45.
The Company has never paid any dividends. Management has expressed the
intention to apply any surplus of the Company into expanded equipment and sales
personnel. It has no plans to pay dividends at any point in the forseeable
future.
ITEM 2. LEGAL PROCEEDINGS
Not applicable.
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ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Not applicable.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following sales were made by the Company within the past three (3)
years in reliance upon an exemption from the registration requirements of the
Securities Act of 1933, as amended, and contained within Regulation D, Rule 504,
promulgated by the Securities & Exchange Commission:
Title Number Price Consideration Date
- ------------- ----------- ------------------- --------------- --------
Common 400,000 $ .001 $ 400 11/25/97
============= =========== =================== =============== ========
Common 3,000 .10 300 11/25/97
============= =========== =================== =============== ========
Common 6,001,000 .01 60,010 12/04/98
============= =========== =================== =============== ========
Common 2,542,000 .05 127,000 4/12/99
============= =========== =================== =============== ========
NOTES TO SALES PURSUANT TO REGULATION D:
(1) All sales were conducted by the issuer. No commissions or underwriting
discounts were paid in connection with the sales.
(2) The class of persons to whom the Company sold the above-referenced
securities were individuals or entities whom the Company has reason to
believe were either accredited investors within the meaning of
Regulation ss.230.501 or were investors having such knowledge and
experience in financial and business matters that the purchaser could
properly evaluate the risks and merits of the investment.
(3) The sales made as of 11/25/97 were made only to residents of the State
of Florida. All other sales were made to individuals or entities
residing in Canada.
(4) The consideration for the sale of securities above as of 12/04/99 in
the amount of $60,010 and as of 4/12/99 in the amount of $127,100 was
paid in each case by the issuance of promissory notes that are callable
on demand and accrue interest at the rate of 2% per annum.
14
<PAGE>
(5) In making the above sales, the Company specifically relied upon
compliance with Rule 504 of Regulation D (Regulation ss.230.504). The
Company qualified for Rule 504 because all offers and sales were made
by the issuer, the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company
was not an investment company, and the Company had a specific business
plan. Further, the Company was in compliance with the conditions as set
forth in Regulation ss.230.504(b).
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
ARTICLE VII of the Bylaws of the Company, entitled "INDEMNIFICATION AND
INSURANCES" provides as follows:
"SECTION 1. INDEMNIFICATION UNDER BCA SECTION 607.0850
The corporation shall have the power to indemnify any director,
officer, employee, or agent of the corporation as provided in Section 607.0850
of the Business Corporation Act.
SECTION 2. ADDITIONAL INDEMNIFICATION
The corporation may make any other or further indemnification or
advancement of expenses of any of its directors, officers, employees, or agents,
under any Bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in the person's official Capacity and as to action
in another capacity while holding such office. However, such further
indemnification or advancement of expenses shall not be made in those instances
specified in Section 607.0850 (7) (a-d) of the Business Corporation Act."
Florida Statute ss.607.0850 provides for the indemnification of a
director and/or officer who is a party to any legal proceeding against them. ".
. . if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful."
Florida Statute ss.607.0950(7) also provides that there shall be no
indemnification to or on behalf of any director or officer if a judgment or
other final adjudication establishes that his or her action, or omissions to
act, were material to the cause of action so adjudicated and constitute (a) a
violation of criminal law unless the officer or director had reasonable cause to
believe his or her conduct was unlawful; (b) a transaction whereby the director
or officer derived an improper personal benefit; (c) in the case of a director,
a violation of his or her fiduciary duties; or (d) willful misconduct.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or controlling persons
pursuant to the foregoing provisions, the Company has been informed that, in the
opinion of the Securities & Exchange Commission, such indemnification is against
public policy as expressed in that Act and is, therefore, unenforceable.
15
<PAGE>
PART F/S
FINANCIAL STATEMENTS
Attached audited financial statements for Frefax, Inc. and subsidiary,
for the years ended June 30, 1999 and June 30, 1998 and for the period from
inception are submitted in compliance with Item 310 of Regulation S-B.
An interim statement is also included in Part F/S as required by Item
310 of Regulation S-B.
16
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1999
AND
FOR THE PERIOD FROM SEPTEMBER 26, 1997
(DATE OF INCEPTION) TO JUNE 30, 1998
AND
CUMULATIVE FROM SEPTEMBER 26, 1997
(DATE OF INCEPTION) TO JUNE 30, 1999
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
number
---------
Independent auditors' report F-1
Consolidated balance sheet at June 30, 1999 F-2
Consolidated statements of operations and comprehensive income
(loss) for the year ended June 30, 1999 and from September 26,
1997 (date of inception) to June 30, 1998 and cumulative from
September 26, 1997 (date of inception) to June 30, 1999 F-3
Consolidated statement of stockholders' deficiency for
the period from September 26, 1997 (date of inception)
to June 30, 1999 F-4
Consolidated statements of cash flows for the year ended June
30, 1999 and from September 26, 1997(date of inception) to
June, 30,1998 and cumulative from September 26, 1997
(date of inception) to June 30, 1999 F-5
Notes to consolidated financial statements F-6 - F-11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Frefax, Inc.
We have audited the accompanying consolidated balance sheet of Frefax, Inc. and
subsidiary (A Development Stage Company) (the "Company") as of June 30, 1999 and
the related consolidated statements of operations and comprehensive income
(loss), stockholders' deficiency and cash flows for the year ended June 30, 1999
and from September 26, 1997 (date of inception) to June 30, 1998 and cumulative
from September 26, 1997 (date of inception) to June 30, 1999. 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of June 30, 1999 and the consolidated results of its operations and
cash flows for the year ended June 30, 1999 and from September 26, 1997 (date of
inception) to June 30, 1998 and cumulative from September 26, 1997 (date of
inception) to June 30, 1999 in conformity with generally accepted accounting
principles.
Massella, Tomaro & Co., LLP
Jericho, New York
January 12, 2000
F-1
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
ASSETS
Current assets:
Cash ................................................... $ 3,813
Recoverable use tax .................................... 4,244
------------
Total current assets .............................. 8,057
Furniture, fixtures and equipment, net ..................... 85,381
------------
Security deposits .......................................... 3,483
Total assets ...................................... $ 96,921
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses .................. $ 14,311
Loans from related party ............................... 130,274
------------
Total current liabilities ......................... 144,585
------------
Commitments and contingencies (Note - 6) ................... --
Stockholders' deficiency:
Common stock - $.001 par value, 50,000,000 shares
authorized, 19,446,000 shares issued and outstanding .. 19,446
Additional paid-in capital ............................. 180,864
Accumulated deficit during the development stage ....... (52,673)
Accumulated other comprehensive income (loss) ......... (6,436)
Stock subscriptions receivable ......................... (188,865)
------------
Total stockholders' deficiency .................... (47,664)
------------
Total liabilities and stockholders' deficiency ............. $ 96,921
============
F-2
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
Cumulative
from
For the four For the four September 26, 1997
months ended months ended (date of inception)
October 31, 1999 October 31, 1998 to October 31, 1999
----------------- ---------------- -------------------
<S> <C> <C> <C>
Income $ - $ - $ -
----------------- ---------------- -------------------
Expenses:
Selling, general and
administrative expenses 41,555 2,850 44,405
Research and development 13,407 - 13,407
----------------- ---------------- -------------------
Total expenses 54,962 2,850 57,812
----------------- ---------------- -------------------
Loss before other income
(expense) and provision for
income taxes (54,962) (2,850) (57,812)
Other income (expense)
Gain on foreign currency
transactions 3,767 - 3,767
Interest income 1,836 - 1,836
Interest expense (360) (104) (464)
----------------- ---------------- -------------------
Total other income (expense) 5,243 (104) 5,139
----------------- ---------------- -------------------
Loss before provision for income taxes (49,719) (2,954) (52,673)
Provision for income taxes - - -
----------------- ---------------- -------------------
Net (loss) (49,719) (2,954) (52,673)
Other items of comprehensive
income (loss) (6,436) - (6,436)
----------------- ---------------- -------------------
Comprehensive net (loss) $ (56,155) $ (2,954) $ (59,109)
================= ================ ===================
Basic:
Net (loss) $ NIL $ NIL $ (.01)
================= ================ ===================
Weighted average number of
common shares outstanding 13,659,614 834,621 8,639,477
================= ================ ===================
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO JUNE 30, 1999
Accumulated Accumulated
Additional Deficit Other Stock Total
Common Stock Paid-in During the Comprehensive Subscriptions Stockholders'
Shares Amount Capital Development Stage Income (Loss) Receivable Deficiency
---------- ------------- ------------ ------------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
upon capitalization of
company 500,000 $ 500 $ 2,000 $ - $ - $ - $ 2,500
Issuance of common stock
in connection with
limited offerings 403,000 403 297 - - - 700
Net loss from date of
inception (September 26,
1997) to June 30, 1998 - - - (2,954) - - (2,954)
---------- ------------- ------------ ------------------ -------------- ------------- ------------
Balances at June 30,
1998 903,000 903 2,297 (2,954) - - 246
Issuance of common
stock in connection with
acquisition of subsidiary 10,000,000 10,000 - - - - 10,000
Issuance of common
stock in connection with
limited offering
(November 1998) 6,001,000 6,001 54,009 - - (60,010) -
Issuance of common
stock in connection with
limited offering
(February 1999) 2,542,000 2,542 124,558 - - (127,100) -
Accrued interest on
subscriptions
receivable - - - - - (1,755) (1,755)
Foreign currency
translation adjustment - - - - (6,436) - (6,436)
Net loss for the year
ended June 30, 1999 - - - (49,719) - - (49,719)
---------- ------------- ------------ ------------------ -------------- ------------- ------------
Balances at June 30, 1999 19,446,000 $ 19,446 $ 180,864 $ (52,673) $ (6,436)$ (188,865)$ n (47,664)
========== ============= ============ ================== ============== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
from
For the four For the four September 26, 1997
months ended months ended (date of inception)
June 30, 1999 June 30, 1998 to June 30, 1999
--------------- ---------------- --------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net (loss) $ (49,719) $ (2,954) $ (52,673)
Adjustments to reconcile
net (loss) to net cash used
for operating activities:
Foreign currency translation (6,436) - (6,436)
Depreciation 2,588 - 2,588
Interest income on
subscriptions receivable (1,755) - (1,755)
(Increase) decrease in:
Recoverable use tax (4,244) - (4,244)
Security deposits (3,483) - (3,483)
Increase (decrease) in:
Accounts payable and accrued
expenses 14,311 - 14,311
--------------- ---------------- --------------------
Net cash used for operating
activities (48,738) (2,954) (51,692)
--------------- ---------------- --------------------
Cash flows from investing activities:
Purchase of furniture, fixtures
and equipment (87,969) - (87,969)
--------------- ---------------- --------------------
Net cash used for investing
activities (87,969) - (87,969)
--------------- ---------------- --------------------
Cash flows from financing activities:
Proceeds from initial
capitalization of company
and from sale of common stock
in connection with private
placements, - 3,200 3,200
Loans from related parties 140,274 - 140,274
--------------- ---------------- --------------------
Net cash provided by financing
activities 140,274 3,200 143,474
--------------- ---------------- --------------------
Net increase in cash 3,567 246 3,813
Cash, beginning of period 246 - -
Cash, end of period $ 3,813 $ 246 $ 3,813
=============== ================ ====================
Supplemental disclosure of
non-cash flow information:
Cash paid during the year for:
Interest $ - $ - $ -
=============== ================ ====================
Income taxes $ - $ - $ -
=============== ================ ====================
Schedule of non-cash investing
activities:
Issuance of 8,543,000 shares of
common stock in exchange for
subscription receivables $ 187,110 $ - $ 187,110
=============== ================ ====================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1999 AND FOR THE PERIOD FROM SEPTEMBER 26, 1997
(DATE OF INCEPTION) TO JUNE 30, 1998
AND
CUMULATIVE FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO JUNE 30, 1999
NOTE 1 - ORGANIZATION
Frefax, Inc. (the "Company") was incorporated in the State of Florida
on September 26, 1997 as Central Group, Inc. The name of the Company
was changed on September 15, 1998 to its current name.
Pursuant to the stock purchase agreement dated July 30, 1998 between
the Company and the shareholders of Frefax, Inc. (Canada), ("Frefax
Canada"), a company incorporated in the province of Ontario, Canada,
the Company issued an aggregate of 10,000,000 shares of its $.001 par
value common stock to the shareholders of Frefax Canada in exchange for
100% of Frefax Canada's issued and outstanding common stock.
Accordingly, Frefax Canada became a wholly owned subsidiary of the
Company. Such transaction is considered a capital transaction whereby
Frefax Canada contributed its stock for the net book value of the
Company.
Frefax Canada was incorporated on September 5, 1996 for the purpose of
developing software to be utilized in reducing long distance telephone
fax charges.
As of June 30, 1999, the Company and Frefax Canada are considered to be
development stage companies.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The Company is considered to be a development stage company as of June
30, 1999 since planned principal operations have not yet commenced.
b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of the Company from September 26, 1997 (date of inception) and its
wholly owned subsidiary, Frefax Canada from July 30, 1998 herein after
referred to as the ("Companies") after elimination of all significant
intercompany transactions and accounts.
c) Cash and cash equivalents
The Company considers highly liquid investments with maturities of
three months or less at the time of purchase to be cash equivalents.
F-6
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d) Furniture, fixtures, and equipment
Furniture, fixtures, and equipment are recorded at cost less
accumulated depreciation which is provided on the straight line basis
over the estimated useful lives of the assets which range between three
and seven years. Expenditures for maintenance and repairs are expensed
as incurred.
e) Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income
Taxes" which requires the use of the "liability method" of accounting
for income taxes. Accordingly, deferred tax liabilities and assets are
determined based on the difference between the financial statement and
tax bases of assets and liabilities, using enacted tax rates in effect
for the year in which the differences are expected to reverse. Current
income taxes are based on the respective periods' taxable income for
federal and state income tax reporting purposes.
f) Earnings per share
During 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." SFAS No. 128 replaced the previously
required reporting of primary and fully diluted earnings per share with
basic and diluted earnings per share, respectively. Unlike the
previously reported primary earnings per share, basic earnings per
share exclude the dilutive effects of stock options. Diluted earnings
per share is similar to the previously reported fully diluted earnings
per share. Earnings per share amounts for all periods presented have
been calculated in accordance with the requirements of SFAS No. 128.
g) Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
h) Fair value disclosure at June 30, 1999
The carrying value of cash and accounts payables and accrued expenses
are a reasonable estimate of their fair value.
F-7
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
i) Effect of New Accounting Standards
The Company does not believe that any recently issued accounting
standards, not yet adopted by the Company, will have a material impact
on its financial position and results of operations when adopted.
j) Foreign Currency Translation
The functional currency for the Company's foreign operation is the
applicable local currency, Canadian dollars. The translation from
Canadian dollars to U.S. dollars is performed for balance sheet
accounts using current exchange rates in effect at the balance sheet
date and for revenue and expense accounts using a weighted average
exchange rate during the period. The resulting translation adjustments
are recorded as a component of comprehensive income. Gains or losses
resulting from foreign currency transactions are included in the
statements of operations.
k) Research and Development Costs
Research and development costs are expensed as incurred. Such costs
amounted to $13,407 and $-0- for the year ended June 30, 1999 and for
the period from September 26, 1997 (date of inception) to June 30,
1998, respectively, and $13,407 from September 26, 1997 (date of
inception) to June 30, 1999.
NOTE 3 - FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment are as follows at June 30, 1999:
Furniture & fixtures ......... $16,891
Equipment .................... 71,078
-------
87,969
Less: accumulated depreciation 2,588
-------
$85,381
Depreciation expense for the year ended June 30, 1999 and for the
period from September 26, 1997 (date of inception) to June 30, 1998
amounted to $2,588 and $- 0 -, respectively. Cumulative depreciation
expense from September 26, 1997 (date of inception) to June 30, 1999
amounted to $2,588.
F-8
1
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at June
30, 1999:
Research and development $ 6,915
Telephone charges ...... 3,440
Other .................. 3,956
-------
$14,311
=======
NOTE 5 - PROVISION FOR INCOME TAX
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist of taxes currently due plus
deferred taxes related to differences between the financial statement
and tax bases of assets and liabilities for financial statement and
income tax reporting purposes. Deferred tax assets and liabilities
represent the future tax return consequences of these temporary
differences, which will either be taxable or deductible in the year
when the assets or liabilities are recovered or settled. Accordingly,
measurement of the deferred tax assets and liabilities attributable to
the book-tax basis differentials are computed by the Company at a rate
of 15% for federal and approximately 6% for state pursuant to SFAS No.
109, and at approximately 22% for Frefax Canada.
The only material tax effect of significant items comprising the
Companies current deferred tax assets as of June 30, 1999 is the
Companies' net operating losses "NOL"s" which combined amounted to
approximately $53,000. The deferred tax asset associated with the
Companies' NOLs amounted to approximately $12,000 as of June 30, 1999.
The Companies have recorded a 100% valuation allowance for the deferred
tax asset since management could not determine that it was "more likely
than not" that the deferred tax asset would be realized in the future.
The Company's NOL's amounting to approximately $28,000 will expire
between the years 2013 - 2014 if not utilized. Frefax Canada's NOL
amounting to approximately $25,000 will expire between the years 2006
and 2007 if not utilized.
The Company and its subsidiary file separate tax returns for federal,
state and foreign tax purpose as such, income tax is based on the
separate taxable income or loss of each entity.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
a) Year 2000
The Companies have addressed and will continue to address the year 2000
issue to ensure the reliability of its operational system and products.
The Companies have and will continue to make certain investment in its
software systems and applications to ensure that it is Year 2000
compliant. These expenditures, which are expensed as incurred are not
expected to be material.
F-9
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
b) Rent
Frefax Canada leased office space under a one-year renewable lease
agreement, which expired November 30, 1999. Rent expense amounted to $
2,274 and $ - 0 - for the year ended June 30, 1999 and for the period
from September 26, 1997 (date of inception) to June 30, 1998,
respectively and $2,274 cumulative from September 26, 1997 (date of
inception) to June 30, 1999. During January 2000, Frefax Canada moved
its operations to a space owned by one of the shareholders of the
Company on a month to month basis, free of charge until a permanent
location is found. The Company itself does not require any significant
office space and, accordingly, it utilizes the mailing address of its
outside counsel on a month to month basis, free of charge.
c) Lack of Insurance
The Company does not maintain any property, product liability, general
liability or any other form of insurance. Although the Company is not
aware of any claims resulting from product malfunctions, there is no
assurance that none exists. In addition, as a result of not maintaing
any property insurance, the Company's equipment is deemed to be at
risk.
NOTE 7 - STOCKHOLDER'S DEFICIENCY
a) Capitalization
The Company was organized during September 1997 by issuing an aggregate
of 500,000 shares of its $.001 par value common stock to its founder
for $2,500.
b) Acquisition of Subsidiary
Pursuant to a stock purchase agreement dated July 30, 1998 between the
Company and the shareholders of Frefax Canada, the
Company issued an aggregate of 10,000,000 shares of its $.001 par value
common stock to the shareholders of Frefax Canada in exchange for 100%
of Frefax Canada issued and outstanding common stock. Accordingly,
after such transaction, Frefax Canada became a wholly owned subsidiary
of the Company. Such transaction is considered a capital transaction
whereby Frefax Canada contributed its stock for the net book value of
the Company, and accordingly, no goodwill is recorded.
c) Limited Offering Memorandums
During October 1997, the Company commenced two Limited Offerings
pursuant to Rule 504 of Regulation D promulgated under the Securities
Act of 1933. The Company offered 400,000 shares of its common stock at
$.001 per share and 4,000 shares of its common stock at $ .10 per
share, respectively. The Company sold an aggregate of 403,000 shares of
common stock yielding net proceeds of $700.
F-10
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
d) Private Offerings
i) During November 1998, the Company offered 7,500,000 shares of
its common stock at $.01 per share pursuant to rule 504 of
regulation D promulgated under the Securities Act of 1933. The
Company sold a total of 6,001,000 shares of common stock in
exchange for a promissory note of $60,010 which has been
classified as a stock subscription receivable thereby reducing
stockholder's equity.
ii) During February 1999, the Company offered 10,000,000 shares of
its common stock at $.05 per share pursuant to Rule 504 of
Regulation D promulgated under the Securites Act of 1933. The
Company sold a total of 2,542,000 shares of common stock in
exchange for a promissory note of $127,100, which has been
classified as a stock subscription receivable thereby reducing
stockholder's equity.
The above promissory notes are callable on demand and accrue interest
at a rate of 2% per annum. As of June 30, 1999, the Company accrued
$1,755 of interest receivable in connection with such notes.
NOTE 8 - RELATED PARTY TRANSACTIONS
a) Loans From Related Parties
The Companies have been advanced funds from a Canadian corporation
which owns approximately 4.1 % of the outstanding common stock of the
Company. In addition, the President of such Canadian corporation owns
approximately 7.7 % of the outstanding common stock of the Company. The
loans are non-interest bearing and are due on demand. As of June 30,
1999, such loans amounted to $130,274.
b) Rent Expense
During January 2000, Frefax Canada moved its equipment to a space owned
by one of the Company's shareholder on a month to month basis, free of
charge until a permanent location is found. The Company itself does not
require any significant office space and, accordingly, it utilizes the
mailing address of its outside counsel on a month to month basis, free
of charge.
c) Equipment Purchases
Frefax Canada purchased equipment and services amounting to $90,335
from a corporation which is a 10.3% shareholder of the Company. In
addition, the President of such corporation, beneficially owns an
additional 20.6% of the Company.
F-11
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
AND
CUMULATIVE FROM
SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(UNAUDITED)
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Page
number
------
Consolidated balance sheet at December 31, 1999 F-1
Consolidated statements of operations and comprehensive
income (loss) for the six months ended December 31, 1999
and 1998 and cumulative from September 26, 1997
(date of inception) to December 31, 1999 F-2
Consolidated statement of stockholders' deficiency for
the period from September 26, 1997 (date of inception)
to December 31, 1999 F-3 - F-4
Consolidated statements of cash flows for the six months
ended December 31, 1999 and 1998 and cumulative from
September 26, 1997 (date of inception) to December 31, 1999 F-5
Notes to consolidated financial statements F-6 - F-8
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
(UNAUDITED)
ASSETS
Current assets:
Cash $ 1,595
Recoverable use tax 4,693
-----------------
Total current assets 6,288
Furniture, fixtures and equipment, net 84,461
Security deposits 3,600
-----------------
Total assets $ 94,349
=================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses $ 3,537
Loans from related party 149,263
-----------------
Total current liabilities 152,800
-----------------
Commitments and contingencies (Note - 3) -
Stockholders' deficiency:
Common stock - $.001 par value, 50,000,000 shares
authorized, 19,446,000 shares issued and outstanding 19,446
Additional paid-in capital 180,864
Accumulated deficit during the development stage (56,290)
Accumulated other comprehensive income (loss) (12,345)
Stock subscriptions receivable (190,126)
------------------
Total stockholders' deficiency (58,451)
-----------------
Total liabilities and stockholders' deficiency $ 94,349
=================
See accompanying notes to consolidated financial statements (unaudited)
F-1
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
from
For the six For the six September 26, 1997
months ended months ended (date of inception)
December 31, 1999 December 31, 1998 to December 31, 1999
----------------- ----------------- --------------------
<S> <C> <C> <C>
Income $ - $ - $ -
----------- ------------ ------------
Expenses:
Selling, general and administrative expenses 5,073 19,836 49,478
Research and development 4,422 - 17,829
----------- ------------ ------------
Total expenses 9,495 19,836 67,307
----------- ------------ ------------
Loss before other income
(expense) and provision for income taxes (9,495) (19,836) (67,307)
Other income (expense):
Gain on foreign currency transactions 4,833 (27) 8,600
Interest income 1,263 64 3,099
Interest expense (218) (213) (682)
----------- ------------ ------------
Total other income (expense) 5,878 (176) 11,017
----------- ------------ ------------
Loss before provision for income taxes (3,617) (20,012) (56,290)
Provision for income taxes - - -
----------- ------------ ------------
Net (loss) (3,617) (20,012) (56,290)
Other items of comprehensive income (loss) (5,909) (470) (12,345)
----------- ------------ ------------
Comprehensive net (loss) $ (9,526) (20,482) $ (68,635)
=========== ============ ============
Basic:
Net (loss) $ NIL $ NIL $ (.01)
=========== ============ ============
Weighted average number of
common shares outstanding 19,446,000 9,326,913 11,056,897
=========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-2
<PAGE>
F-11
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Accumulated
Additional Deficit Other Stock Total
Common Stock Paid-in During the Comprehensive Subscriptions Stockholders'
Shares Amount Capital Development Stage Income (Loss) Receivable Deficiency
---------- ------------- ------------ ------------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common
stock upon
capitalization
of company 500,000 $ 500 $ 2,000 $ - $ - $ - $ 2,500
Issuance of common
stock in
connection with
limited offerings 403,000 403 297 - - - 700
Net loss from date
of inception
(September 26, 1997)
to June 30, 1998 - - - (2,954) - - (2,954)
----------- -------- -------- ---------- ---------- --------- ----------
Balances at
June 30, 1998 903,000 903 2,297 (2,954) - - 246
Issuance of common
stock in connection
with acquisition
of subsidiary 10,000,000 10,000 - - - - 10,000
Issuance of common
stock in connection
with limited offering
(November 1998) 6,001,000 6,001 54,009 - - (60,010) -
Issuance of common
stock in connection
with limited offering
(February 1999) 2,542,000 2,542 124,558 - - (127,100) -
Accrued interest on
subscriptions
receivable - - - - - (1,755) (1,755)
Foreign currency
translation adjustment - - - - (6,436) - (6,436)
Net loss for the
year ended
June 30, 1999 - - - (49,719) - - (49,719)
----------- -------- -------- ---------- ---------- --------- ----------
Balances at
June 30, 1999
(forwarded) 19,446,000 19,446 180,864 (52,673) (6,436) (188,865) (47,664)
----------- -------- -------- ---------- ---------- --------- ----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-3
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO
DECEMBER 31, 1999 (UNAUDITED) (cont'd)
<TABLE>
<CAPTION>
Accumulated Accumulated
Additional Deficit Other Stock Total
Common Stock Paid-in During the Comprehensive Subscriptions Stockholders'
Shares Amount Capital Development Stage Income (Loss) Receivable Deficiency
---------- ------------- ------------ ------------------ -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
June 30, 1999
(from previous page) 19,446,000 $ 19,446 $180,864 $ (52,673) $ (6,436) $(188,865) $ (47,664)
Accrued interest on
subscriptions
receivable - - - - - (1,261) (1,261)
Foreign currency
translation adjustment - - - - (5,909) - (5,909)
Net loss for the six
months ended
December 31, 1999 - - - (3,617) - - (3,617)
----------- -------- -------- ---------- ---------- --------- ----------
Balances at
December 31, 1999 19,446,000 $ 19,446 $180,864 $ (56,290) $ (12,345) $(190,126) $ (58,451)
=========== ======== ======== =========== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-4
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
from
For the six For the six September 26, 1997
months ended months ended (date of inception)
December 31, 1999 December 31, 1998 to December 31, 1999
----------------- ----------------- --------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (3,617) $ (20,012) $ (56,290)
Adjustments to reconcile net (loss) to
net cash used for operating activities:
Foreign currency translation (5,909) (470) (12,345)
Depreciation 1,739 - 4,327
Interest income on subscriptions receivable (1,261) - (3,016)
(Increase) decrease in:
Recoverable use tax (449) - (4,693)
Security deposits (117) (3,332) (3,600)
Increase (decrease) in:
Accounts payable and accrued expenses (10,774) - 3,537
---------- ---------- -----------
Net cash used for operating activities (20,388) (23,814) (72,080)
---------- ---------- -----------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment (819) (24,938) (88,788)
---------- ---------- -----------
Net cash used for investing activities (819) (24,938) (88,788)
---------- ---------- -----------
Cash flows from financing activities:
Proceeds from initial capitalization of
company and from sale of common
stock in connection with private placements - - 3,200
Loans from related parties 18,989 60,073 159,263
---------- ---------- -----------
Net cash provided by financing activities 18,989 60,073 162,463
---------- ---------- -----------
Net (decrease) increase in cash (2,218) 11,321 1,595
Cash, beginning of period 3,813 246 -
---------- ---------- -----------
Cash, end of period $ 1,595 $ 11,567 $ 1,595
========== ========== ===========
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ - $ - $ -
========== ========== ===========
Income taxes $ - $ - $ -
========== ========== ===========
Schedule of non-cash investing activities:
Issuance of 8,543,000 shares of common stock
in exchange for subscription receivables $ - $ - $ 187,110
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-5
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
AND
CUMULATIVE FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1999
(UNAUDITED)
NOTE 1 - ORGANIZATION
Frefax, Inc. (the "Company") was incorporated in the State of
Florida on September 26, 1997 as Central Group, Inc. The name
of the Company was changed on September 15, 1998 to its
current name.
Pursuant to the stock purchase agreement dated July 30, 1998
between the Company and the shareholders of Frefax, Inc.
(Canada), ("Frefax Canada") a company incorporated in the
province of Ontario, Canada, the Company issued an aggregate
of 10,000,000 shares of its $.001 par value common stock to
the shareholders of Frefax Canada in exchange for 100% of
Frefax Canada's issued and outstanding common stock.
Accordingly, Frefax Canada became a wholly owned subsidiary of
the Company. Such transaction is considered a capital
transaction whereby Frefax Canada contributed its stock for
the net book value of the Company.
Frefax Canada was incorporated on September 5, 1996 for the
purpose of developing software to be utilized in reducing long
distance telephone fax charges.
As of December 31, 1999, the Company and Frefax Canada are
considered to be development stage companies.
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with
instructions to Form 10-QSB. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, the interim
financial statements include all adjustments necessary in
order to make the financial statements not misleading. The
results of operations for the six months ended are not
necessarily indicative of the results to be expected for the
full year. For further information, refer to the Company's
audited financial statements and footnoted thereto as of June
30, 1999.
NOTE 2 - STOCKHOLDERS' DEFICIENCY
Acquisition of Subsidiary
Pursuant to a stock purchase agreement dated July 30, 1998
between the Company and the shareholders of Frefax Canada, the
Company issued an aggregate of 10,000,000 shares of its $.001
par value common stock to the shareholders of Frefax Canada in
exchange for 100% of Frefax Canada issued and outstanding
common stock. Accordingly, after such transaction, Frefax
Canada became a wholly owned subsidiary of the Company. Such
transaction is considered a capital transaction whereby Frefax
Canada contributed its stock for the net book value of the
Company, and accordingly, no goodwill is recorded.
F-6
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 3 - COMMITMENTS AND CONTINGENCIES
a) Year 2000
---------
The Companies have addressed and will continue to
address the year 2000 issue to ensure the reliability
of its operational system and products. The Companies
have and will continue to make certain investment in
it software systems and applications to ensure that
it is Year 2000 compliant. These expenditures, which
are expensed as incurred are not expected to be
material.
b) Rent
Frefax Canada leased office space under a one-year
renewable lease agreement, which expired November 30,
1999. Rent expense amounted to $1,755 and $322 for
the six months ended December 31, 1999 and 1998,
respectively and $4,029 cumulative from September 26,
1997 (date of inception) to December 31, 1999. During
January 2000, Frefax Canada moved its operations to a
space owned by one of the Company's shareholders on a
month to month basis free of charge until a permanent
location is found.
c) Lack of Insurance
-----------------
The Company does not maintain any property, product
liability, general liability or any other form of
insurance. Although the Company is not aware of any
claims resulting from product malfunctions, there is
no assurance that none exists. In addition, as a
result of not maintaining any property insurance, the
Company's equipment is deemed to be at risk.
NOTE 4 - RELATED PARTY TRANSACTIONS
a) Loans From Related Parties
The Companies have been advanced funds from a
Canadian corporation, which owns approximately 4.1 %
of the outstanding common stock of the Company. In
addition, the President of such Canadian corporation
owns 7.7 % of the outstanding common stock of the
Company. The loans are non-interest bearing and are
due on demand. As of December 31, 1999, such loans
amounted to $149,263.
F-7
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS (CONT'D)
b) Rent Expense
During January 2000, Frefax Canada moved its
operations to a space owned by one of its
shareholders on a month to month basis, free of
charge until a permanent location is found. The
Company itself does not require any significant
office space and, accordingly, it utilizes the
mailing address of its outside counsel on a month to
month basis free of charge.
c) Equipment Purchases
During the six months ended December 31, 1999 and
1998, Frefax Canada purchased equipment and services
amounting to approximately $0 and $25,000 from a
corporation which is a 10.3% shareholder of the
Company. In addition, the President of such
corporation beneficially owns an additional 20.6% of
the Company.
F-8
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit Number Page Number Description
- -------------- ----------- ----------------------------
2(i) E-1 Articles of Incorporation of
Central Group, Inc.
2(ii) E-4 Articles of Amendment to
Articles of Incorporation of
Central Group, Inc.
2(iii) E-6 Bylaws of Frefax, Inc.
3 E-26 Stock Purchase Agreement
17
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities & Exchange Act of 1034,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
FREFAX, INC.
(Registrant)
Date: April 19, 2000 By: /s/ Debra A. Sauer
-------------------
Debra A. Sauer
President & Chief Executive
Officer
18
ARTICLES OF INCORPORATION
OF
CENTRAL GROUP, INC.
FILED 97 SEP 26 PM 1:39
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
The undersigned, acting as incorporator of a corporation under the
Florida Business Corporation Act, adopts the following Articles of Incorporation
for such corporation:
ARTICLE I
The name of the corporation is: CENTRAL GROUP, INC.
ARTICLE II
The period of duration of the corporation is perpetual.
ARTICLE III
The purpose or purposes for which the corporation is organized is to
engage in any type of activity, within or without the United States which is
lawful under the laws of the United States and the State of Florida.
ARTICLE IV
The street address of the initial principal office of the corporation
and the mailing address of the corporation is: 2151 West Hillsboro Blvd., Suite
204, Deerfield Beach, Florida 33442.
E-1
<PAGE>
ARTICLE V
The total authorized capital stock of this Corporation shall consist of
Fifty Million (50,000,000) shares of voting common stock, having a par value of
$.001 each, amounting in the aggregate to Fifty Thousand Dollars ($50,000.00).
All stock when issued shall be fully paid for and shall be nonassessable and
shares of the Corporation are not to be divided into classes.
The holders of the outstanding capital stock shall be entitled to
receive, when and as declared by the Board of Directors, dividends payable
either in cash, in property, or in shares of the capital stock of the
corporation. In any event, dividends on the common stock of this corporation
shall have no cumulative rights whatsoever and dividends will not accumulate if
the Directors do not declare dividends, whether or not there is a surplus
available to the Board of Directors for the payment of dividends.
Each shareholder of this corporation shall have one vote per share of
issued and outstanding shares.
ARTICLE VI
The street address of the initial registered office of this Corporation
is 2151 West Hillsboro Blvd., Suite 204, Deerfield Beach, Florida 33442. The
initial registered agent of this Corporation is: Debra A. Sauer.
ARTICLE VII
This Corporation shall have up to five (5) Directors, under such terms and
conditions as shall be specified in the By-laws.
E-2
<PAGE>
ARTICLE VIII
The name and address of the person signing these Articles as the
incorporator is:
Debra A. Sauer
2151 West Hillsboro Blvd., Suite 204
Deerfield Beach, Florida 33442.
ARTICLE IX
The power to adopt, alter, amend or repeal By-laws shall be vested in
the Board of Directors.
ARTICLE X
The Shareholders of this corporation shall not have preemptive rights
to acquire the corporation's unissued shares.
ARTICLE Xl
The shareholders shall have the absolute power to adopt, amend, alter,
change or appeal these Articles of Incorporation when proposed and approved at a
stockholder's meeting with not less than a majority vote of the issued and
outstanding common stock.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation this 25th day of September, 1997
/s/ Debra A. Sauer
-------------------------------------
DEBRA A. SAUER
INCORPORATOR
E-3
CERTIFICATE OF DESIGNATION
REGISTERED AGENT/REGISTERED OFFICE
Pursuant to the provisions of Sections 607.0501 or 617.0501, Florida
Statutes, the undersigned corporation, organized under the laws of the State of
Florida, submits the following statement in designating the registered
office/registered agent, in the State of Florida.
1. The name of the corporation is: CENTRAL GROUP, INC.
2. The name and address of the registered agent and office is:
DEBRA A. SAUER
2151 West Hillsboro Blvd., Suite 204
Deerfield Beach, Florida 33442.
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS CERTIFICATE, I HEREBY
ACCEPT THE APPOINTMENT AS REGlSTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISlONS OF ALL STATUTES RELATING TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATIONS OF MY POSITION AS REGISTERED AGENT.
/s/ Debra A. Sauer
---------------------------
DEBRA A. SAUER
September 25,1997
FILED 97 SEP 26 PM 1:39
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
E-4
<PAGE>
FILED
98 SEP 15 AM 8:17
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION OF
CENTRAL GROUP, INC.
TO: Department of State
Tallahassee, Florida 32314
Pursuant to Florida Statute ss.607.1006, this corporation adopts the following
articles of amendment to its articles of incorporation:
FIRST: The name of this corporation is: CENTRAL GROUP, INC.
SECOND: ARTICLE I is hereby deleted in its entirety and a new ARTICLE I is
adopted as follows:
"ARTICLE I
THE NAME OF THE CORPORATION IS: FREFAX, INC."
THIRD: The date of the above amendment's adoption is September 10,1998.
FOURTH:
Prior to the adoption of this amendment, the board of directors
proposed this amendment and recommended its adoption to the
shareholders. After due notice provided to the shareholders according
to the requirements of Florida Statute ss.607.0705, at a meeting of
the shareholders on September 10,1998 the number of common stock votes
cast, being the only class of stock of the corporation, was sufficient
for approval of this amendment.
Signed this 14th day of September, 1998
/s/ Debra A. Sauer
------------------------
Debra A. Sauer
President
Chairman of the Board
E-5
BYLAWS
OF
FREFAX, INC.
(A Florida Corporation)
ARTICLE I - OFFICES
SECTION 1. PRINCIPAL PLACE OF BUSINESS
The initial location of the principal place of business of the
corporation shall be as specified in the articles of incorporation and may be
changed from time to time by resolution of the board of directors. It may be
located at any place within or outside the State of Florida.
The principal place of business of the corporation shall also be known
as the principal office of the corporation.
SECTION 2. OTHER OFFICES
The corporation may also have offices at such other places as the board
of directors may from time to time designate, or as the business of the
corporation may require.
ARTICLE II - SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS
All meetings of the shareholders shall be held at the principal place
of business of the corporation or at such other place, within or outside the
State of Florida, as may be determined by the board of directors.
SECTION 2. ANNUAL MEETINGS
The annual meeting of the shareholders shall be held on the first day
of the month of April in each year, at 10:00 o'clock A.M., at which time the
shareholders shall elect a board of directors and transact any other proper
business. If this date falls on a legal holiday, then the meeting shall be held
on the following business day at the same hour.
E-6
<PAGE>
SECTION 3. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the board of
directors or by the shareholders. In order for a special meeting to be called by
the shareholders, 10 percent or more of all votes entitled to be cast on any
issue proposed to be considered at the proposed special meeting shall sign, date
and deliver to the secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
The secretary shall issue the call for special meetings unless the
president, the board of directors, or the shareholders designate another person
to make the call.
SECTION 4. NOTICE OF MEETINGS
Notice of all shareholders' meetings, whether annual or special, shall
be given to each shareholder of record entitled to vote at such meeting no fewer
than 10 or more than 60 days before the meeting date. The notice shall include
the date, time and place of the meeting and in the case of a special meeting the
purpose or purposes for which the meeting is called. Only the business within
the purpose or purposes included in the notice of special meeting may be
conducted at a special shareholders' meeting.
Notice of shareholders' meetings may be given orally or in writing, by
or at the direction of the president, the secretary or the officer or persons
calling the meeting. Notice of meetings may be communicated in person; by
telephone, telegraph, teletype, facsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the shareholder at the
shareholder's address as it appears on the stock transfer books of the
corporation, with postage prepaid.
When a meeting is adjourned to a different date, time or place, it
shall not be necessary to give any notice of the adjourned meeting if the new
date, time or place is announced at the meeting at which the adjournment is
taken, and any business may be transacted at the adjourned meeting that might
have been transacted on the original date of the meeting. If, however, after the
adjournment, the board fixes a new record date for the adjourned meeting, notice
of the adjourned meeting in accordance with the preceding paragraphs of this
bylaw shall be given to each person who is a shareholder as of the new record
date and is entitled to vote at such meeting.
E-7
<PAGE>
SECTION 5. WAIVER OF NOTICE
A shareholder may waive any notice required by the Florida Business
Corporation Act, the articles of incorporation or these bylaws before or after
the date and time stated in the notice. The waiver must be in writing, be signed
by the shareholder entitled to the notice, and be delivered to the corporation
for inclusion in the minutes or filing with the corporate records. Neither the
business to be transacted at nor the purpose of any annual or special meeting of
the shareholders need be specified in any written waiver of notice.
SECTION 6. ACTION WITHOUT MEETING
Any action which is required by law to be taken at an annual or special
meeting of shareholders, or any action which may be taken at any annual or
special meeting of shareholders, may be taken without a meeting, without prior
notice, and without a vote if one or more written consents, setting forth the
action so taken, shall be dated and signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Written consents shall not be effective to take
corporate action unless, within 60 days of the date of the earliest written
consent relating to the action, the signed written consents of the number of
holders required to take the action are delivered to the corporation.
Within 10 days after obtaining any such authorization by written
consent, notice must be given to those shareholders who have not consented in
writing or who are not entitled to vote on the action. The notice shall fairly
summarize the material features of the authorized action.
SECTION 7. QUORUM AND SHAREHOLDER ACTION
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. Unless otherwise
provided under law, the articles of incorporation or these bylaws, if a quorum
is present, action on a matter, other than the election of directors, shall be
approved if the votes cast by the holders of the shares represented at the
meeting and entitled to vote favoring the action exceed the votes cast opposing
the action. Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
E-8
<PAGE>
SECTION 8. VOTING OF SHARES
Each outstanding share shall be entitled to one vote on each matter
submitted to a vote at a meeting of shareholders, except as may be provided
under law or the articles of incorporation. A shareholder may vote either in
person or by proxy executed in writing by the shareholder or the shareholder's
duly authorized attorney-in-fact.
At each election of directors, each shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by the shareholder, for as many persons as there are directors to
be elected at that time and for whose election the shareholder has a right to
vote.
SECTION 9. PROXIES
A shareholder, or the shareholder's attorney in fact, may appoint a
proxy to vote or otherwise act for the shareholder. An executed telegram or
cablegram appearing to have been transmitted by such person, or a photographic,
photostatic, or equivalent reproduction of an appointment form, shall be a
sufficient appointment form.
An appointment of a proxy is effective when received by the secretary
or other officer or agent authorized to tabulate votes. An appointment is valid
for up to 11 months unless a longer period is specified in the appointment form.
An appointment of a proxy is revocable by the shareholder unless the
appointment form conspicuously states that it is revocable and the appointment
is coupled with an interest as provided in Section 607.0722(5) of the Florida
Business Corporation Act (BCA or Business Corporation Act).
SECTION 10. RECORD DATE FOR DETERMINING SHAREHOLDERS
The board of directors may fix in advance a date as the record date for
the purpose of determining shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote, or to take any other action. In
no event may a record date fixed by the board of directors be a date preceding
the date upon which the resolution fixing the record date is adopted. A record
date may not be specified to be more than 70 days before the meeting or action.
Unless otherwise specified by resolution of the board of directors, the
following record dates shall be operative:
1. The record date for determining shareholders entitled to demand a
special meeting is the date the first shareholder delivers the shareholder's
demand to the corporation.
E-9
<PAGE>
2. If no prior action is required by the board of directors pursuant to
the Business Corporation Act, the record date for determining shareholders
entitled to take action without a meeting is the date the first signed written
consent relating to the proposed action is delivered to the corporation.
3. If prior action is required by the board of directors pursuant to
the Business Corporation Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the Board of directors adopts the resolution taking such prior action.
4. The record date for determining shareholders entitled to notice of
and to vote at a meeting of shareholders is at the close of business on the day
before the first notice is delivered to the shareholders.
SECTION 11. SHAREHOLDERS' LIST
After a record date is fixed or determined in accordance with these
bylaws, the secretary shall prepare an alphabetical list of the names of all its
shareholders who are entitled to notice of a shareholders' meeting. The list
shall show the addresses of, and the number and class and series, if any, of
shares held by, each person.
The shareholders' list shall be available for inspection by any
shareholder for a period of 10 days prior to the meeting, or such shorter time
as exists between the record date and the meeting, and continuing through the
meeting, at the corporation's principal place of business.
ARTICLE III - DIRECTORS
SECTION 1. POWERS
Except as may be otherwise provided by law or the articles of
incorporation, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, the board of directors.
A director who is present at a meeting of the board of directors or a
committee of the board of directors when corporate action is taken shall be
deemed to have assented to the action taken unless:
1. The director votes against or abstains from the action taken;
or
2. The director objects at the beginning of the meeting, or
promptly upon the directors arrival, to holding the meeting or
transacting specified business at the meeting.
E-10
<PAGE>
The board of directors shall have the authority to fix the compensation
of the directors.
SECTION 2. QUALIFICATION AND NUMBER
Directors shall be individuals who are 18 years of age or older but
need not be residents of Florida or shareholders of this corporation.
The authorized number of directors shall be five or any lessor number
if so elected by the shareholders. This number may be increased or decreased
from time to time by amendment to these bylaws, but no decrease shall have the
effect of shortening the term of any incumbent director.
SECTION 3. ELECTION AND TENURE OF OFFICE
The directors shall be elected at each annual meeting of the
shareholders and each director shall hold office until the next annual meeting
of shareholders and until the director's successor has been elected and
qualified, or until the director's earlier resignation or removal from office.
SECTION 4. VACANCIES
Unless otherwise provided in the articles of incorporation, any vacancy
occurring in the board of directors, including any vacancy created by reason of
an increase in the number of directors, may be filled by the affirmative vote of
a majority of the remaining directors, though less than a quorum of the board of
directors, or by the shareholders.
A director elected to fill a vacancy shall hold office only until the
next shareholders' meeting at which directors are elected.
E-11
<PAGE>
SECTION 5. REMOVAL
Unless the articles of incorporation provide that a director may only
be removed for cause, at a meeting of shareholders called expressly for that
purpose, one or more directors may be removed, with or without cause, if the
number of votes cast to remove the director exceeds the number of votes cast not
to remove the director.
SECTION 6. PLACE OF MEETING
Meetings of the board of directors shall be held at any place, within
or without the State of Florida, which has been designated in the notice of the
meeting or, if not stated in the notice or if there is no notice, at the
principal place of business of the corporation or as may be designated from time
to time by resolution of the board of directors.
The board of directors may permit any or all directors to participate
in meetings by, or conduct the meeting through the use of, any means of
communication by which all directors participating can simultaneously hear each
other during the meeting.
SECTION 7. ANNUAL AND REGULAR MEETINGS
An annual meeting of the board of directors shall be held without call
or notice immediately after and at the same place as the annual meeting of the
shareholders.
Other regular meetings of the board of directors shall be held at such
times and places as may be fixed from time to time by the board of directors.
Call and notice of these regular meeting shall not be required.
SECTION 8. SPECIAL MEETINGS AND NOTICE REQUIREMENTS
Special meetings of the board of directors may be called by the
chairman of the board or by the president and shall be preceded by at least 2
days' notice of the date, time, and place of the meeting. Unless otherwise
required by law, the articles of incorporation or these bylaws, the notice need
not specify the purpose of the special meeting.
E-12
<PAGE>
Notice of directors' meeting may be given orally or in writing, by or
at the direction of the president, the secretary or the officer or persons
calling the meeting. Notice of meetings may be communicated in person; by
telephone, telegraph, teletype, facsimile machine, or other form of electronic
communication; or by mail. If mailed, notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the director at the
director's current address on file with the corporation, with postage prepaid.
If any meeting of directors is adjourned to another time or place,
notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
SECTION 9. QUORUM
A majority of the elected number of directors shall constitute a quorum
for all meetings of the board of directors.
SECTION 10. VOTING
If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors when corporate action is taken shall be deemed to have
assented to the action taken unless:
1. The director objects at the beginning of the meeting, or
promptly upon arriving, to holding the meeting or transacting
specified business at the meeting; or
2. The director votes against or abstains from the action taken.
SECTION 11. WAVIER OF NOTICE
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
or the manner in which it has been called or convened, except when a director
states, at the beginning of the meeting or promptly upon arrival at the meeting,
any objection to the transaction of business because the meeting is not lawfully
called or convened.
SECTION 12. ACTION WITHOUT MEETING
Any action required or permitted to be taken at a board of directors'
meeting or committee meeting may be taken without a meeting if the action is
taken by all members of the board of directors or of the committee. The action
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member.
E-13
<PAGE>
ARTICLE IV - OFFICERS
SECTION 1. OFFICERS
The officers of the corporation shall consist of a chairman of the
board, a president, a vice president, a secretary, a treasurer, and such other
officers as the board of directors may appoint. A duly appointed officer may
appoint one or more officers or assistant officers if authorized by the board of
directors.
The same individual may simultaneously hold more than one office in the
corporation.
Each officer shall have the authority and shall perform the duties set
forth in these bylaws and, to the extent consistent with these bylaws, shall
have such other duties and powers as may be determined by the board of directors
or by direction of any officer authorized by the board of directors to prescribe
the duties of other officers.
SECTION 2. ELECTION
All officers of the corporation shall be elected or appointed by, and
serve at the pleasure of, the board of directors.
The election or appointment of an officer shall not itself create
contract rights.
SECTION 3. REMOVAL, RESIGNATION AND VACANCIES
An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date if the board
provides that the successor does not take office until the effective date.
The board of directors may remove any officer at any time with or
without cause. Any officer or assistant officer, if appointed by another
officer, may likewise be removed by such officer.
An officer's removal shall not affect the corporation's contract
rights, if any, with the officer.
Any vacancy occurring in any office may be filled by the board of
directors.
E-14
<PAGE>
SECTION 4. CHAIRMAN OF THE BOARD
The Chairman shall be the chief executive officer and general manager
of the corporation and shall, subject to the direction and control of the board
of directors, have general supervision, direction, and control of the business
and affairs of the corporation. He shall preside at all meetings of the
shareholders if present thereat and be an ex-officio member of all the standing
committees, including the executive committee, if any, and shall have the
general powers and duties of management usually vested in the office of
president of a corporation.
In the absence or disability of the president, the vice president, if
any, shall perform all the duties of the president and, when so acting, shall
have all the powers of, and be subject to all the restrictions imposed upon, the
president.
SECTION 5. PRESIDENT/VICE PRESIDENT
The president shall be the chief operating officer of the corporation
and shall, subject to the direction and control of the board of directors and
the Chairman, have the responsibility of conducting the day-to-day operations of
the corporation in terms of its product production, sales, and research.
SECTION 6. SECRETARY
(a) The secretary shall be responsible for preparing, or causing to be
prepared, minutes of all meetings of directors and shareholders and for
authenticating records of the corporation.
(b) The secretary shall keep, or cause to be kept, at the principal
place of business of the corporation, minutes of all meetings of the
shareholders or the board of directors; a record of all actions taken by the
shareholders or the board of directors without a meeting for the past three
years; and a record of all actions taken by a committee of the board of
directors in place of the board of directors on behalf of the corporation.
(c) Minutes of the meetings shall state the date, time and place of the
meeting; whether regular or special; how called or authorized; the notice
thereof given or the waivers of notice received; the names of those present at
directors' meetings; the number of shares present or represented at
shareholders' meetings; and an account of the proceedings thereof.
E-15
<PAGE>
(d) The secretary shall maintain, at the principal place of business of
the corporation, a record of its shareholders, showing the names of the
shareholders and their addresses, the number, class, and series, if any, held by
each, the number and date of certificates issued for shares, and the number and
date of cancellation of every certificate surrendered for cancellation.
(e) The secretary shall make sure that the following papers and reports
are included in the secretary's records kept at the principal place of business
of the corporation:
1. The articles or restated articles of incorporation and all
amendments to them currently in effect;
2. The bylaws or restated bylaws and all amendments to them
currently in effect;
3. Resolutions adopted by the board of directors creating one or
more classes or series of shares and fixing their relative
rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding;
4. Minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past 3
years;
5. Written communications to all shareholders generally or all
shareholders of a class or series within the past 3 years,
including the financial statements furnished for the past 3
years under Article VI, Section 2 of these bylaws and any
reports furnished during the last 3 years under Article VI,
Section 3 of these bylaws;
6. A list of the names and business street addresses of current
directors and officers; and
7. The corporation's most recent annual report delivered to the
Department of State under Article VI, Section 4 of these
bylaws.
The secretary shall give, or cause to be given, notice of all meetings
of shareholders and directors required to be given by law or by the provisions
of these bylaws.
The secretary shall have charge of the seal of the corporation.
In the absence or disability of the secretary, the assistant secretary,
or, if there is none or more than one, the assistant secretary designated by the
board of directors, shall have all the power of, and be subject to all the
restrictions imposed upon, the secretary.
E-16
<PAGE>
SECTION 7. TREASURER
The treasurer shall have custody of the funds and securities of the
corporation and shall keep and maintain, or cause to be kept and maintained, at
the principal business office of the corporation, adequate and correct books and
records of accounts of the income, expenses, assets, liabilities, properties and
business transactions of the corporation.
The treasurer shall prepare, or cause to be prepared, and shall furnish
to shareholders, the annual financial statements and other reports required
pursuant to Article VI, Sections 2 and 3 of these bylaws.
The treasurer shall deposit monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the board of directors. The treasurer shall disburse the funds of the
corporation in payment of the just demands against the corporation as authorized
by the board of directors and shall render to the president and directors,
whenever requested, an account of all his or her transactions as treasurer and
of the financial condition of the corporation.
In the absence or disability of the treasurer, the assistant treasurer,
if any, shall perform all the duties of the treasurer and, when so acting, shall
have all the powers of and be subject to all the restrictions imposed upon the
treasurer.
SECTION 8. COMPENSATION
The officers of this corporation shall receive such compensation for
their services as may be fixed by resolution of the board of directors.
ARTICLE V - EXECUTIVE AND OTHER COMMITTEES
SECTION 1. EXECUTIVE AND OTHER COMMITTEES OF THE BOARD
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate from its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution, the articles of incorporation or these bylaws, shall have
and may exercise the authority of the board of directors, except that no such
committee shall have the authority to:
1. Approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders.
2. Fill vacancies on the board of directors or any committee
thereof.
3. Adopt, amend, or repeal the bylaws.
E-17
<PAGE>
4. Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board
of directors.
5. Authorize or approve the issuance or sale or contract for the
sale of shares, or determine the designation and relative
rights, preferences, and limitations of a voting group except
that the board of directors may authorize a committee (or a
senior executive officer of the corporation) to do so within
limits specifically prescribed by the board of directors.
Each such committee shall have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted by a
majority of the authorized number of directors, may designate one or more
directors as alternate members of any such committee who may act in the place
and stead of any absent member or members at any meeting of such committee.
The provisions of law, the articles of incorporation and these bylaws
which govern meetings, notice and waiver of notice, and quorum and voting
requirements of the board of directors shall apply to such committees of the
board and their members as well.
Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority shall
alone constitute compliance by any member of the board of directors not a member
of the committee in question with the director's responsibility to act in good
faith, in a manner the director reasonably believes to be in the best interests
of the corporation, and with such care as an ordinarily prudent person in like
position would use under similar circumstances.
ARTICLE VI - CORPORATE BOOKS, RECORDS AND REPORTS
SECTION 1. BOOKS, RECORDS AND REPORTS
The corporation shall keep correct and complete books and records of
account; minutes of the proceedings of its shareholders, board of directors, and
committees of directors; a record of its shareholders; and such other records
and reports as are further described in Article IV, Sections 5 and 6 of these
bylaws, at the principal place of business of the corporation.
Any books, records, and minutes may be in written form or in another
form capable of being converted into written form within a reasonable time.
E-18
<PAGE>
SECTION 2. ANNUAL FINANCIAL STATEMENTS FOR SHAREHOLDERS
Unless modified by resolution of the shareholders within 120 days of
the close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income statement
for that year, and a statement of cash flow for that year. If financial
statements are prepared on the basis of generally accepted accounting
principles, the annual financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public
accountant, the accountant's report must accompany them. If not, the statements
must be accompanied by a statement of the president or the person responsible
for the corporation's accounting records:
1. Stating the person's reasonable belief whether the statements
were prepared on the basis of generally accepted accounting
principles and, if not, describing the basis of preparation,
and
2. Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the
statements prepared for the preceding year.
The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the corporation
to prepare its financial statements if, for reasons beyond the corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed the
statements, the corporation shall mail the shareholder the latest financial
statements.
Copies of the annual financial statements shall be kept at the
principal place of business of the corporation for at least 5 years, and shall
be subject to inspection during business hours by any shareholder or holder of
voting trust certificates, in person or by agent.
E-19
<PAGE>
SECTION 3. OTHER REPORTS TO SHAREHOLDERS
If the corporation indemnifies or advances expenses to any director,
officer, employee, or agent, other than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained by the
corporation, the corporation shall report the indemnification or advance in
writing to the share- holders with or before the notice of the next
shareholders' meeting, or prior to such meeting if the indemnification or
advance occurs after the giving of such notice but prior to the time that such
meeting is held. The report shall include a statement specifying the persons
paid, the amounts paid, and the nature and status at the time of such payment of
the litigation or threatened litigation.
If the corporation issues or authorizes the issuance of shares for
promises to render service in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
SECTION 4. ANNUAL REPORT TO DEPARTMENT OF STATE
The corporation shall prepare and deliver an annual report form to the
Department of State each year within the time limits imposed, and containing the
information required, by Section 607.1622 of the Business Corporation Act.
SECTION 5. INSPECTION BY SHAREHOLDERS
(a) A shareholder of the corporation is entitled to inspect and copy,
during regular business hours at the corporation's principal office, the records
of the corporation described in Article IV, Section 5(e) of these bylaws if the
shareholder gives the secretary written notice of the shareholder's demand at
least 5 business days before the date on which the shareholder wishes to inspect
and copy.
(b) A shareholder of this corporation is entitled to inspect and copy,
during regular business hours at a reasonable location specified by the
corporation, any of the following records of the corporation if the shareholder
meets the requirements of subsection (c) below and gives the corporation written
notice of the shareholder's demand at lest 5 business days before the date on
which the shareholder wishes to inspect and copy:
1. Excerpts from minutes of any meeting of the board of
directors, records of any action of a committee of
the board of directors while acting in place of the
board of directors on behalf of the corporation,
minutes of any meeting of the shareholders, and
records of action taken by the shareholders or board
of directors without a meeting, to the extent not
subject to inspection under subsection (a) above;
2. Accounting records of the corporation;
3. The record of shareholders; and
4. Any other books and records of the corporation.
(c) A shareholder may inspect and copy the records described in
subsection (b) above only if:
E-20
<PAGE>
1. The shareholder's demand is made in good faith and
for a purpose reasonably related to the shareholder's
interest as a shareholder;
2. The demand describes with reasonable particularity
the shareholder's purpose and the records the
shareholder desires to inspect; and
3. The records requested are directly connected with the
shareholder's purpose.
(d) This section of the bylaws does not affect:
1. The right of a shareholder to inspect and copy
records under Article II, Section 11 of these bylaws;
2. The power of a court, independently of the Business
Corporation Act, to compel the production of
corporate records for examination.
SECTION 5. INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind of the
corporation and to inspect the physical properties of the corporation. Such
inspection by a director may be made in person or by agent or attorney. the
right of inspection includes the right to copy and make extracts.
ARTICLE VII - INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION UNDER BCA SECTION 607.0850
The corporation shall have the power to indemnify any director,
officer, employee, or agent of the corporation as provided in Section 607.0850
of the Business Corporation Act.
SECTION 2. ADDITIONAL INDEMNIFICATION
The corporation may make any other or further indemnification or
advancement of expenses of any of its directors, officers, employees, or agents,
under any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, both as to action in the person's official capacity and as to action
in another capacity while holding such office. However, such further
indemnification or advancement of expenses shall not be made in those instances
specified in Section 507.0850(7)(a-d) of the Business Corporation Act.
E-21
<PAGE>
SECTION 3. COURT ORDERED INDEMNIFICATION
Unless otherwise provided by the articles of incorporation
notwithstanding the failure of the corporation to provide indemnification, and
despite any contrary determination of the board or of the shareholders in the
specific case, a director, officer, employee, or agent of the corporation who is
or was a party to a proceeding may apply for indemnification or advancement of
expenses, or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction in accordance with Section
607.0850(9) of the Business Corporation Act.
SECTION 4. INSURANCE
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation against any liability asserted against the person and incurred
by the person in any such capacity or arising out of the person's status as
such, whether or not the corporation would have the power to indemnify the
person against such liability under provisions of law.
ARTICLE VIII - SHARES
SECTION 1. ISSUANCE OF SHARES
The bond of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed, promises
to perform services evidenced by a written contract, or other securities of the
corporation.
Before the corporation issues shares, the board of directors shall
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and nonassessable.
When the corporation receives the consideration for which the board of
directors authorized the issuance of shares, the shares issued therefor are
fully paid and nonassessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
The corporation may place in escrow shares issued for a contract for
future services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may credit distributions in respect of
the shares against their purchase price, until the services are performed, the
note is paid, or the benefits received. If the services are not performed, the
shares escrowed or restricted and the distributions credited may be canceled in
whole or part.
E-22
<PAGE>
SECTION 2. CERTIFICATES
After shares in corporation have been fully paid, the holder of the
shares shall be given a certificate representing the shares. At a minimum, each
share certificate shall state on its face the following information:
1. The name of the corporation and that the corporation is
organized under the laws of Florida;
2. The name of the person to whom issued;
3. The number and class of shares and the designation of the
series, if any, the certificate represents.
Each certificate shall be signed, either manually or in facsimile, by
the president or a vice president and by the secretary or an assistant secretary
of the corporation and may bear the seal of the corporation.
ARTICLE IX - DIVIDENDS
SECTION 1. PAYMENT OF DIVIDENDS
The board of directors may authorize, and the corporation may make,
dividends on its shares in cash, property, or its own shares and other
distributions to its shareholders, subject to any restrictions contained in the
articles of incorporation, to the requirements of Sections 607.0623 and
607.06401 of the Business Corporation Act, and to all applicable provisions of
law.
ARTICLE X - AMENDMENT OF ARTICLES AND BYLAWS
SECTION 1. AMENDMENT OF ARTICLES OF INCORPORATION
The board of directors may propose one or more amendments to the
articles of incorporation for submission to the shareholders. For the amendment
to be effective:
1. The board of directors must recommend the amendment to the
shareholders, unless the board of directors determines that because of conflict
of interest or other special circumstances it should make no recommendation and
communicates the basis for its determination to the shareholders with the
amendment; and
E-23
<PAGE>
2. The shareholders entitled to vote on the amendment must approve the
amendment as provided below.
The board of directors may condition its submission of the proposed
amendment to the shareholders on any basis. The shareholders shall approve
amendments to the articles of incorporation by the vote of a majority of the
votes entitled to be cast on the amendment, except as may otherwise be provided
by the articles of incorporation, Sections 607.1003 and 607.1004 of the Business
Corporation Act and other applicable provisions of law, and these bylaws.
The corporation shall notify each shareholder, whether or not entitled
to vote, of the proposed shareholders' meeting to amend the articles of
incorporation in accordance with Article II, Section 4 of these bylaws. The
notice of meeting must state that the purpose, or one of the purposes, of the
meeting is to consider the proposed amendment and contain or be accompanied by a
copy or summary of the amendment.
Notwithstanding the above provisions of this section and unless
otherwise provided in the articles of incorporation, if this corporation has 35
or fewer shareholders then, pursuant to Section 607.1002(6) of the Business
Corporation Act, the shareholders may amend the articles of incorporation
without an act of the directors at a meeting of the shareholders for which the
notice of the changes to be made is given.
SECTION 2. AMENDMENT OF BYLAWS
The board of directors may amend or repeal these bylaws unless:
1. The articles of incorporation or the Business Corporation Act
reserves the power to amend the bylaws generally or a particular bylaw provision
exclusively to the shareholders; or
2. The shareholders, in amending or repealing the bylaws generally or a
particular bylaw provision, provide expressly that the board of directors may
not amend or repeal the bylaws or that bylaw provision.
The shareholders may amend or repeal these bylaws even though the
bylaws may also be amended or repealed by the board of directors.
E-24
<PAGE>
CERTIFICATE
This is to certify that the foregoing is a true and correct copy of the
Bylaws of the corporation named in the title hereto and that such Bylaws were
duly adopted by the board of directors of the corporation on October 1, 1997.
The Bylaws reflect the change of name of the Corporation.
Dated: October 1, 1998
Secretary
--------------
Debra A. Sauer
E-25
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the "Balance
Sheet, Statement of operations, Statement of Cash Flows" and Notes thereto
incorporated in Part 2 of this Form 10-SB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 1,595
<SECURITIES> 0
<RECEIVABLES> 4,693
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,288
<PP&E> 84,461
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,349
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 19,446
<OTHER-SE> (77,897)
<TOTAL-LIABILITY-AND-EQUITY> 94,349
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 218
<INCOME-PRETAX> (3,617)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,617)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,526)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
