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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street N.W., Washington, D.C. 20549
FORM 10 - SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER -
ZSTAR ENTERPRISES, INC.
(Exact Name Of Registrant As Specified In Its Charter)
NEVADA 98-019-6675
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4323 West 12th Avenue
Vancouver, B.C., Canada, V6R 2P9
(604) 224-5851 Fax: (604) 224-5838
Attention: Chui Keung Ho
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(Address, Including Zip Code, And Telephone Number, Including Area Code,
Of Registrant's Principal Executive Offices)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which each class
to be so registered is sought to be registered
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Common Stock OTC Electronic Bulletin Board
Securities Registered Pursuant to Section 12(b) of the Act:
Common Shares $.001 par value
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Title of each class to be so registered
Total Number of Pages: 53
Index to Exhibits Appears on Page: 52
(Filing stipulated in United States Dollars Unless Otherwise Stated)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
TABLE OF CONTENTS
PAGE
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS. . . . . . . . . . . . . . . 1
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . . 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . .19
ITEM 3. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . .26
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .27
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL. . . . .28
ITEM 6. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . .29
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . .30
ITEM 8. DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . .31
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS . . . . . . . . .32
ITEM 2. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . .32
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING. . . . . . . . .33
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES . . . . . . . . . . .33
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . .34
PART F/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
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PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
ITEM 1 INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . .52
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-SB includes forward-looking statements. All statements, other
than statements of historical fact, included in this Form 10-SB, including,
without limitation, statements under "Description of Business" and
"Management's Discussion and Analysis or Plan of Operation" regarding the
Company's business strategy and plans and objectives of management of the
Company for future operations, are forward-looking statements within the
meaning of the "safe harbour" provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are not guarantees of
future performance and are subject to certain risks, uncertainties and
assumptions that are difficult to predict; therefore, actual results may
differ materially from those expressed, forecasted, or contemplated by any
such forward-looking statements. Important factors that could cause actual
results to differ materially from the Company's expectations are disclosed in
this Form 10-SB, including, without limitation, in conjunction with the
forward-looking statements included in this Form 10-SB.
Unless required by law, the Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. INTRODUCTION
Zstar Enterprises, Inc. ("Company") was organized under the laws of the State on
Nevada on June 17, 1998. The Company is authorized to issue 30,000,000 shares of
Common Stock with a par value of $.001 per share, of which 10,550,000 shares are
issued and outstanding as of January 31, 1999.
The Company is a NEW Nevada corporation formed by a small founding group with
the intention of (i) providing internet - based hotel discounting services, and
(ii) serving as a holding company for one or more future businesses not yet
identified. The Company currently has no subsidiaries and has not yet commenced
commercial operations.
The Company's initial business is projected to be as an Internet-based hotel
room discounter. The Company proposes to sell hotel rooms, at discount rates,
directly to travelers who make their own arrangements via the World Wide Web.
The Company also proposes to sell rooms at wholesale rates to travel agencies.
The Company recognizes the growing influence that the Internet has on
communications and commerce. The Company believes that the travel sector is one
of the areas that will see tremendous new business opportunities through the
Internet. The Company intends to create an easy-to-use website where
individuals can research, design and book their own hotel packages at discount
prices.
Offering an electronic means to access hotel products will allow the Company to
have worldwide sales opportunities 24 hours a day and to accumulate knowledge
about client preferences and buying habits. The accumulated data base of user
preferences will enable the Company to offer its customers specifically designed
travel packages.
B. THE INDUSTRY
THE TRAVEL INDUSTRY
The travel industry is one of the largest industries in the world. For example,
in 1994, Americans took over 220 million trips and spent over $140 billion on
travel. International travel continues to grow as airfares become relatively
less expensive.
Business travel, tourism and the visiting-friends-and-relatives ("VFR") are all
important segments of the industry's customer base.
Leisure travel, or tourism and VFR travel, is usually booked by individuals who
are seeking low cost, convenience and knowledge when they book their travel.
Business travelers, whether individuals or an entity's corporate travel
coordinator are looking for ways to
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control costs, negotiate long term price arrangements and standardize travel
booking procedures.
The traveling public has traditionally relied on travel agencies to provide
information and to make bookings. Agencies act as middlemen between the
traveler and the provider and receive a commission from the provider for their
service.
Historically the travel industry has been at the forefront of adopting new
technological innovations with proprietary systems such as Computer Reservations
Systems ("CRS"). Travel agencies have been performing a "middleman" function and
using their specialized technology infrastructure and knowledge to justify their
costs. New technologies and the "capping" of commissions are rendering the
traditional service providers un-competitive.
Several trends are affecting the travel industry:
- - increased competition through globalization and deregulation
- - changing consumer demands because of changing lifestyles: e.g. specialized
adventure travel
- - increased expectations by consumers for convenience and customized packages
- - consumers are becoming more knowledgeable and are growing accustomed to
using technology
- - the Internet and electronic commerce are changing how travel products are
bought and sold
THE INTERNET
The Internet is the world's largest telecommunications network in existence
today and has brought low cost global computer telecommunications within the
reach of all businesses and many consumers in almost all developed and
third-world growth economies.
The Internet and Internet technology has been growing and evolving since its
inception over 30 years ago. From its inceptions, the Internet was intended as
more than just a computer network, but as a means of facilitating collaboration
and development at great speed among groups like academics, industry researchers
and business entrepreneurs.
Originally created as a means of information exchange for the U.S. Department of
Defense, it quickly became adopted by others who developed the network to
support open global academic and research activities. People would be able to
send messages, research material and various other types of communications
electronically. Data would be converted and sent over telephone lines through a
vast computer network. Transmission time was much faster than mail or fax with
the added advantage of being low cost: no long-distance charges were incurred
since messages were relayed to a local computer network.
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Innumerable individuals, companies, researchers etc. now use the Internet and
its technologies to significantly enhance their specific activity or pursuit.
The worldwide network of hosts (sites) has grown from 2000 to 1 million in the
past eight years and is likely to exceed 100 million hosts over the next five
years.
The Internet Business Center made the following data available collected from
the 10th Annual software Publishing Association Conference:
- - It is estimated that 60% of U.S. households will have PC's by the end of
1998
- - 12% of households with PC's have modems
- - 6% of households with PC's subscribe to on-line Internet services
- - the Internet is growing between 6% and 12% per month
- - there are Internet sites in 137 countries
- - the cost of subscribing to an Internet service is declining
- - many major businesses (226 of the 490 largest companies) already have a
presence on the Internet
- - 39% of all communications companies have a presence on the Internet
- - 24% of information technology firms have a presence on the Internet
Reasons why people use the internet according to Georgia Tech Research
Corporation's ("GTRC") 1998 survey (Of the users surveyed, over one third said
that they were willing to pay fees for information services, providing quality
was ensured):
[CHART]
- - 86.03% Searching
- - 63.01% Browsing
- - 54.05% Work
- - 51.21% Education
- - 47.02% Communication
- - 45.48% Entertainment
- - 18.65% Shopping
(RESPONDENTS ANSWERED MORE THAN ONE CATEGORY, CAUSING TOTAL TO BE GREATER THAN
100%)
The Internet has quickly become a mainstream component of everyday life. In
June 1998 it was estimated that there were approximately 37 million North
Americans on-line.
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Accessing the Internet is now the third most popular use of computers behind
playing games and word processing.
The Internet has created a whole new level of commercial transactions called
e-Commerce. Today it is possible to buy everything from groceries to a car
on-line. A recent Roper Starch back-up survey conducted in June 1998 indicated
that 75% of people on-line have used the Internet to research an item and 22%
have actually made a purchase via the Web. A poll commissioned by the
Information Technology Association of America in early 1998 estimated that 15%
of all adult Americans have used the Internet to make a purchase.
While research shows varying results regarding the use of the Internet, it is
clear that the growing numbers indicate that the Internet will be one of the
most important tools for both businesses and individuals in the coming years.
GROWTH
[CHART]
People are spending more time on-line, both at home and at work. In 1994, only
three million Americans were connected to the Internet. A joint study by IDC and
Relevant Knowledge claims that home Internet users will grow to 102 million in
2002 and the percentage using the Internet for electronic commerce will grow to
50%. The U.S. Department of Commerce estimates that Internet traffic is doubling
every 100 days.
Conservative estimates put the number of worldwide users of the Internet at 60
million with nearly 70% living in Canada or the United States. eMarketer
predicts that Asia/Pacific Rim, South America and several underdeveloped parts
of the world will have more Internet users than the U.S. by the year 2000. By
the year 2002, it is expected that there will be 228 million users worldwide,
with American users representing only 37% of such user base.
True globalization of Internet use and electronic commerce will occur over the
next few years due to:
- - the deregulation and lower costs of telecommunications in previously
controlled markets.
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- - increased computer use and modem penetration
- - the attraction of electronic commerce to foreign businesses looking to draw
revenues from a worldwide market
E-COMMERCE
Electronic Commerce ("e-Commerce") is the buying and selling of information,
products or services via computer networks. e-Commerce is allowing buyers and
sellers to communicate directly rather than through third parties.
Consumer oriented industries, such as travel, where service and information play
a large part in the buying process, are becoming important e-commerce
participants. Generally speaking, the more time consuming and difficult a
purchase category is, the more likely it is that consumers will use the Internet
versus standard means.
[CHART]
The travel industry, particularly in relation to airline reservations, was an
early entrant into e-Commerce. Internet users quickly discovered the advantages
to travel planning and booking on-line. Rather than rely on an airline or agent
to give you the best fares, a person could design an itinerary and explore all
the options and prices available before booking.
[CHART]
An e-commerce study by dePaul University found that 60% of Internet users aged
30 to 49 years have already made at least one purchase electronically. Other
studies estimate that between 15% and 24% of all Internet users have made a
purchase on-line. A report recently released by the Deloitte & Touche
Consulting Group estimates that by the Year 2000, e-commerce will grow by 300%
and that many businesses will be conducting over
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half of their business over the Internet.
[CHART]
A report by eMarketer concludes that consumer e-commerce will grow to $26.6
billion US by 2002 and business-to-business e-commerce will climb to $268
billion US from an estimated $5.6 billion in 1997.
The U.S. Department of Commerce has suggested that e-commerce will surpass $300
million in the next two years. This is partially based on their estimate that
Internet usage is doubling every 100 days.
IMPLICATIONS FOR THE TRAVEL INDUSTRY
Technology can promote products in a less expensive and more interactive way
than is currently possible in the travel industry.
Multimedia (sound, video and images) allows customers to better understand a
hotel property without having to interact with a sales representative or travel
agent.
Print material is expensive, becomes quickly outdated and is expensive to
distribute. A website, which can be continually maintained and updated avoids
those costs.
Costs to hotels or other travel service providers will also fall dramatically.
For example, an airline ticket costs $8 to process by conventional means but can
be done over the Web for $1. A traditional bank transaction, by comparison,
costs $1.07, while the same transaction over the Web costs one cent.
Internet-based travel sites will be able to offer customers two things that are
currently not available through conventional travel booking means:
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- - CONVENIENCE: available 24 hours a day, from home or office; information on
several different travel products all in one place--reducing research costs
- - CUSTOMIZATION: by noting preferences and anticipating needs, a properly
maintained site can target customers with special offers or even integrate
products from other suppliers such as travelers checks and cameras.
According to Jupiter Communications, on-line travel revenues are expected to
grow from $827 million or less than one percent of all travel revenues in 1997
to $8.9 billion or 8.2% of all travel revenues by the year 2002. Forrester
Research on the other hand reports that travel revenues on-line were $276
million in 1997 and are expected to exceed $1.5 billion by the year 2000.
In a recent poll, between 65% and 75% of those using the Internet said that they
would consider making a purchase on-line, especially hotel reservations or
airline tickets. Of users who have already made purchases vial the Internet, 5%
have purchased travel services. Today however, eStats estimates that travel
accounts for 24% of all on-line revenues.
[CHART]
C. ACQUISITION OF APEX
The Company has entered into a non-binding Letter of Intent (the "Letter of
Intent") dated September 2, 1998 pursuant to which the Company has the option to
acquire 100% of the issued and outstanding voting shares of Apex Canadian
Holidays Ltd., a Canadian private company ("Apex").
APEX CANADIAN HOLIDAYS LTD. ("APEX")
Apex is a Canadian private company, incorporated on October 24, 1996, with
principal offices in British Columbia, Canada. The management and staff of Apex
have over 25
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years of combined hospitality industry experience. Apex
specializes in the sale of hotel rooms (retail and wholesale) and land tour
packages primarily in the Asian and North American markets.
Apex currently has hotel room sales of approximately Cdn$0.65 million annually.
The company also has a website at www.apexholidays.com that will become the
portal for users of the Company's service (subject to consummation of the
transaction set forth in the Letter of Intent). The website will undergo a
design upgrade in order to meet the Company's objectives. LYNX Internet and
Marketing of Vancouver, BC., Canada, will be responsible for the website upgrade
as well as management of the site.
Apex's Actual Financial Summary (in Canadian dollars):
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
DESCRIPTION 1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $645,864 $1,124,618 $1,129,696
- --------------------------------------------------------------------------
Gross Margin 80,195 113,476 109,898
- --------------------------------------------------------------------------
(Net Loss) (2,445) (388) (12,815)
- --------------------------------------------------------------------------
</TABLE>
The Company plans to use proprietary internet software that it is currently
developing to independently enhance Apex's existing web site with plans to
eventually create a virtual "shopping centre" of travel products. Eventually,
the Company anticipates being able to expand its website content to include
properties in Europe, Australia and South America.
By acquiring Apex, an established travel hotel and land tour service company,
the Company will acquire an established client base. The acquisition of Apex
will also give the Company access to management personnel with expertise and
experience in the travel related business. Apex already has established
infrastructures, such as hotel contracts, that will give the Company an
immediate ability to offer properties to website users.
LYNX INTERNET AND MARKETING.
Zstar has entered into an agreement with LYNX Internet & Marketing ("LYNX")
of Vancouver, British Columbia, Canada, a local Internet service provider and
website designer to develop a website that will meet the Company's business
objectives. In addition, LYNX will be responsible for the management of the
website and will provide office and hardware server space, and use of its
CO-3 communication line (currently more efficient/faster than ISDN lines).
Subsequent to the consummation of its acquisition of Apex, the Company will
move to larger facilities, if necessary, so that it can retain the
flexibility necessary to upgrade to the most current technology. The
agreement provides for an operations site, service and partial equipment
access for $1,000 per month. The Company has determined that this agreement
is sufficient for its first 12-18 months of business activity.
KEY PERSONNEL OF APEX
DAVID HO, DIRECTOR AND PRESIDENT OF APEX TRAVEL LTD.
David Ho is a 42-year-old businessman, who for the past 11 years has been
involved with a number of start-up companies, business management and
strategic planning projects. From 1987 to present, Mr. Ho has held senior
executive positions and acted as director for various companies including his
present position as President of Apex Travel Ltd. David Ho is a specialist
in strategic planning and business development. Mr. Ho is a
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graduate of the University of Manitoba with a Bachelor of Science degree in
Computers (1979).
David Ho is related by blood to Chui Keung Ho, who is the President and
Director of the Company. David Ho's ownership in Apex Travel Ltd. is
currently 23.5% of the issued and outstanding voting stock. David Ho does
not own any shares in the Company.
YEN LOH, MANAGER OF APEX
Ms. Loh has been a travel consultant and tour coordinator since 1987. She
specializes in designing tour products and negotiating rates with suppliers
and wholesalers. Ms. Loh has traveled extensively and lived in Asia and
Canada, and has a strong, first-hand knowledge of the Asia Pacific travel
markets. Ms. Loh is tri bilingual, speaking both English, Chinese, and Malay.
MARY S.Y. JIE, TRAVEL CONSULTANT FOR APEX
Ms. Jie has been a travel consultant and tour coordinator since 1994. She
specializes in client bookings, and reconfirmation's. Ms. Jie has lived in
Hong Kong, Australia and Canada and has a strong, first-hand knowledge of the
Asia Pacific travel markets. Ms. Jie is bilingual, speaking both English and
Cantonese.
OPERATIONS
After the acquisition of Apex, the Company will have acquired a fully
functional travel and hospitality related company and will have staff,
office, equipment and established business accounts. The employees of Apex
are expected to be primarily involved in customer service, confirming
bookings with hotels and sales/negotiations with hotel properties.
It is presently anticipated that, if and when the Company becomes fully
operational, the Company will require additional employees. Specifically:
- One employee in accounting
- One employee in administration
- One employee in Information Systems
- Two employees in Marketing/Sales
The Company is not subject to any collective bargaining agreement. It is
anticipated that the Company's employees will be covered by an employee stock
option plan; however, at this stage, the terms of such a plan have not been
determined.
Although the primary contact with the Company will be via its website, a
toll-free telephone number will also be made available in the event that
clients need immediate customer
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service. The Company plans to develop a marketing strategy for its services
using trade shows, trade press and strategic advertising on internet browsers
such as Yahoo or Lycos.
Technology and management information systems work is expected to be provided
on an outsourced basis by LYNX. It is the Company's intention that LYNX will
maintain the Company's server capabilities and software programs so that the
Company and its clients experience minimal downtime.
The Company expects to have a small, in-house accounting staff to handle
collections, payables and bookkeeping duties. The Company also expects to
have virtually no receivables because of the nature of its business
transactions. Payments will be received from clients as cash (bank drafts) or
credit card charges and the Company will be responsible for remitting
payments to the relevant hotel a net of commissions. If a client chooses to
pay the hotel directly, the hotel will remit the commission to the Company.
D. PRODUCTS AND SERVICES
The Company does not expect to be dependent on any suppliers for any
essential raw material, energy or other items. The Company does not have any
existing supply contracts (except with LYNX).
The Company will offer customized hotel packages at discount prices through
an Internet website. Internet visitors will be able to arrange and book
their own hotel rooms conveniently and securely over the Company's website.
Asian and North American properties will be featured ranging from urban
locations to vacation settings. The Company anticipates that strategic
partnerships will expand its product offerings so that airfares, land tours,
car rentals and other travel arrangements may be booked through web site
links offered at the site.
The Company will be unique in three ways:
(i) it will represent smaller, independent hotels such as bed and
breakfast inns or specialty properties that are unlikely to
be affiliated with any central reservations systems or large
chains. This will enable the target hotels to get greater
exposure, in a cost-effective manner. The Company will earn
revenues on a commission basis and through the sale of advertising
on its site. Other hotel websites usually charge their listing
hotels a listing or participation fee.
(ii) the Company will offer hotel rooms at discounted prices to retail
customers and wholesale rates to travel agencies. Travelers who
book through traditional means such as a retail travel agency,
toll-free number or travel website generally pay "rack" or retail
prices for their hotel rooms. It is envisaged that travelers who
book directly through the Company's service will receive hotel
rates that are approximately 30% lower than regular retail rates.
Travel agencies will receive wholesale rates that will be at a
discount to the retail rate. Travel agents will have
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access to the Company's site via a password which will allow them
access to the wholesale rates available to "trade" clientele.
(iii) the Company's product will be customized. Various travel agencies
and tour companies offer hotel and tour packages. As the
Company's system expands, it will be able to target users with
offerings designed especially with their preferences in mind.
Users will simply access the Company's site and browse through it using a
dedicated search engine. Booking hotel rooms will be very simple, allowing
the client to specify a number of criteria including destination, price
range, number of nights, number of people and so on.
PRODUCT DELIVERY
Clients accessing the Company's website and making bookings will do so by
credit card or by special account number/password. The Company will require
approximately 48 hours to confirm the reservation with the hotel. When the
reservation is made, the Company will send the client a confirmation via
e-mail and will charge the credit card. A voucher for the hotel reservation
will also be sent to the client via mail or courier.
SUPPLIERS & ADVERTISERS
The Company intends to enter into agreements with both hotels and with hotel
re-sellers to list their properties in return for commissions on rooms sold.
The Company will sell banner advertising and links to sites that offer
complementary products or services. For example, airlines, tour companies
and car rental agencies would be potential advertising clients.
FUTURE PRODUCT LINE ADDITIONS
Products will be added based primarily on what is being sought by the
Company's website users. This will be determined through information
gathered through on-line questionnaires.
The Company anticipates that it will add other key travel products such as
land tour packages and car rentals on a graduated basis. "Accessory"
products such as travelers checks, insurance, cameras, etc., may also be
added as either direct sale items or links through other web sites offering
such items for sale.
TECHNOLOGY
Users of the Company's service will be able to log on to the Company's
website, browse hotel properties, make inquiries as to room availability and
book their own reservations.
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The Company proposes to design its service using existing internet software
and hardware technologies. An integrated hardware and software system will
be strategically designed to provide an efficient, secure service for users.
COMPETITIVE ADVANTAGES
It is anticipated that the Company will possess three distinct competitive
advantages:
(i) LOW COST: The Company proposes to design and maintain an interactive
and integrated website capable of providing information on an
extensive list of smaller, independent hotels. The estimated cost
to create the site is $5,000, and another $1,000 per month will be
required to maintain the site.
The hotels represented by the Company will pay a commission on
bookings. Commission rates vary between 8% and 10%.
Traditionally, hotels have relied on sales calls, trade shows and
print materials such as brochures and directories to promote their
properties. Print materials are costly, become outdated quickly
and have a high cost of distribution. A website may be updated
with photos and text in a very timely and cost effective manner.
Special limited time promotions, for example, may be featured and
conveyed to a much wider potential audience than print media. A
website may also feature downloadable multimedia presentations,
which can be a strong sales tool for a hotel property.
(ii) CUSTOMER FOCUS: A numbers of travelers prefer the intimacy and
uniqueness of smaller hotel properties. The Company will target
this customer base. Users who visit the site will be asked
questions relating to their travel needs and preferences. The
Company will process this information and, based on an
understanding of its users needs will select the right hotels for
presentation and selection.
(iii) PRODUCT LEADERSHIP: As the Company's site evolves, it will provide
destination information relating to the city, region, climate,
visa requirements, points of interest, etc.. The Company will
also have directions to get to a particular property as well as
products useful for the trip, such as traveler's checks and
insurance.
REVENUE PROJECTIONS
It is envisaged that the Company will earn revenues in the form of
commissions and advertising fees. It is anticipated that hotels will remit
to the Company commissions ranging between 8% and 10% for rooms booked
through the Company's website. In addition, banner advertising and website
links are projected to generate revenues of $1.6 million per year by the 5th
year of the Company's operations. Operating costs, including staff,
technology, maintenance and selling and administrative are expected to be
$1.0
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million by Year 5. Initial capital raised in the amount of $241,000 is
being used to develop software, working capital, and capital assets.
BUSINESS OBJECTIVES USING THE INTERNET
- - Use the internet as an improvement to the current business communications
environment, and as an adjunct to the Company's advertising and marketing
strategy, or part of an on-line sales effort.
- - Increase corporate name recognition in a low-cost manner.
- - To survey, and to be in regular communications with, customers.
- - To sell the Company's product globally.
- - The Company's target customer profile fits the demographics of the
internet user community.
- - To match the Company's communications network to the internet
communications environment.
E. MARKETING STRATEGY
As an Internet-based service, the Company will have a presence on the World
Wide Web. Key to the Company's success will be the strategic use of Internet
links and keywords. Its strongest product feature will be that hotel rooms
will be sold at very competitive prices pursuant to pre-existing contracts
that the Company will have with individual hotels. The key to the successful
marketing of the service will be strategic use of the Internet itself as a
marketing tool. The Company plans to develop an effective marketing strategy
that includes registering with key search engines such as Yahoo and Alta
Vista. The Company may also choose to advertise on various internet portals.
The Company's services will also be outlined in various print materials
including brochures and inserts to be included in a variety of mail-outs such
as credit car bills or frequent flyer statements.
During the Company's initial marketing phase in Canada, United States and
Europe, local press will be targeted with press releases. Advertising will
be purchased in key publications such as Conde Nast Traveler, Destinations,
various in-flight magazines and local newspaper travel sections.
The Company will also participate in travel trade shows and new product
forums that feature travel or Internet-based products.
TARGET SEGMENTS
The Company's target market segment is both travelers and travel agents with
access to the Internet and likelihood to participate in e-commerce. As
nearly as can be determined
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from independent studies, this could be as many as 100 million potential users
by the year 2002.
Further, the Company intends to target travelers who are interested in
smaller, more intimate or more unique hotel properties than can be typically
found through other Internet sites. Demographic studies show that a growing
number of travelers are seeking the unusual or out-of-the-ordinary when they
make travel arrangements.
COMPETITION
There are a number of web sites currently providing hotel reservations via
the Internet. The Company's research shows that all of them provide rooms at
retail or 'rack' rates. Some of the Web sites charge a listing fee for
hotels plus a regularly monthly participation fee. Others are affiliated
with international central reservations systems and participating hotels are
also part of those systems. Set forth below are the websites that the
Company's management foresees will be in direct competition with the Company.
TRAVELOCITY (WWW.TRAVELOCITY.COM)
Travelocity is owned by SABRE Interactive and represents 32,000 hotels. Users
must log on and register every time they visit the site.
ALL THE HOTELS ON THE WEB (WWW.ALL-HOTELS.COM)
This site offers links to over 10,000 hotels with sites on the World Wide
Web. It is a directory of hotel websites organized by region. The site does
not have any affiliation with any of the hotels it lists.
THE HOTEL GUIDE (WWW.HOTELGUIDE.COM)
This site offers 60,000 hotels worldwide and only offers direct booking
on-line for a few. Users can generate a form that can be printed out and
faxed to the hotel of choice.
TRAVEL WEB (WWW.TRAVELWEB.COM)
The Travel Web has access to 9,000 hotels in 125 countries. The site is
published by PEGASUS systems Inc. that is in turn owned by 15 of the world's
largest hotel and travel companies. This site offers hotels, airline and car
reservations. In 1996, it sold over $5 million in hotel rooms and since
then, their on-line hotel revenues have increased by 40% per month. Sales
have been made to users in more than 60 countries and are today estimated to
be one million dollars per month.
INTERNET TRAVEL NETWORK (WWW.ITN.NET)
This site has more than 2.5 million registered users, double what it had one
year ago. Its overall revenues have increased by 500% since last year.
Users access airlines, hotels and car reservations via ITN's public and
partner sites. ITN accesses multiple central reservations systems to offer
its services.
THIRD PARTY INTERNET SERVICE PROVIDER (ISP)
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The Company will enter into an agreement with its chosen ISP that will
clearly outline the terms and conditions of service.
The contract will specify the level of performance to be delivered by the ISP
to ensure that the Company's clients are not met with busy signals or
"downed" systems. The Company and the ISP will outline the amount of
"uptime" and acceptable "downtime" that can be expected. The Company will
require that there is limited downtime so as to prevent lost sales
opportunities.
The Company's chosen ISP will provide secure communications with adequate
firewalls so that the Company's clients may be assured of secured
reservations and transmission of credit card information over the Internet.
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F. MARKETING
The Company recognizes that its success will depend on how well it structures
its Internet based advertising and marketing strategy. The physical location of
the Company in an electronic environment is not the determining factor but
rather creating links and paths from search engines and other sites to allow as
many potential clients as possible to access the Company's site. The Company is
aware that most people find Internet sites primarily through recommendations,
electronic directories, magazines or journals and Usenet groups and will develop
a strategy to get its site name recognition through each method.
The Company may also become involved in Usenet discussion groups in specialty
subjects such as "travel", "travel, Asia" and so on to generate leads for
targeted advertising and promotion.
E-mail mailing lists with target demographics may currently be purchased, just
like traditional mailing lists. In addition, many demographic groups are
already organized around discussion groups. The Company may register its
website with the various informal directories on the Internet.
CORPORATE PRESENCE
The Internet is a means by which the Company can gain market presence and
increase consumer awareness of its products. The Company can also use its
Internet presence as a unique tool to attract hotel properties and to have them
offer their products through the Company's website. Having a presence on the
Internet will allow the Company to be associated with new areas of technology
and to be a leading edge travel service provider.
ADVERTISING ON INTERNET ON-RAMPS
In many cases, internet portals provide a welcome screen that supports
advertising. The Company will investigate opportunities to advertise with such
operators.
DIRECTORIES
The Company will register its domain name with as many electronic directories as
possible such as Yahoo and Alta Vista, and will regularly update all links.
ADVERTISING
The Internet can be used for advertising in a manner similar to print. Internet
advertising may also be used as an enhancement to the Company's business cards,
letterhead and brochures. The Company's Internet address included in a brochure
or trade magazine advertisement for example, provides potential clients with the
ability to access additional information that is more detailed and potentially
more current than the print medium.
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USENET NEWSGROUPS
A Usenet newsgroup is an ideal way to find out who is interested in the
Company's type of products and services. The Company plans to regularly
participate in ongoing discussions in order to build its credibility and
goodwill. When appropriate, the Company will provide select announcements to
well-matched newsgroups, for example announcing the addition of new hotel
properties in a particular country of interest. The Company may also set up its
own newsgroup where users can get useful information about a particular subject
area on which the Company is focusing, for example "travel, Asia, Bali".
E-MAIL LISTS AND SERVICES
E-mails lists are the electronic equivalent of the more traditional direct
mailing lists.
To build or obtain e-mailing lists, the Company may monitor newsgroups that are
likely to attract the types of people likely to be interested in its products,
then collect the addresses of participants in order to create a mailing list.
The Company could also purchase an e-mailing list from a reputable broker and
use this for direct customer solicitations.
In addition, the Company proposes to get customers to sign up voluntarily. A
check-box on the Company's website could get visitors to the site the
opportunity to sign on to the Company's e-mailing list.
CUSTOMER SERVICE & SALES SUPPORT
The Internet offers the ability to provide customer support 24 hours a day,
seven days a week. The Company will provide an e-mail address for clients that
will direct requests or queries to service personnel.
Sales support can be implemented using varying degrees of automation or
personnel-based approaches. For example, clients could send a reservation
request to the Company's e-mail server, which would automatically send back an
acknowledgment of receipt response.
A potential side benefit of a customer support e-mail address is that it may be
used to entice clients to sign up for an e-mail mailing list for new products
and follow-up surveys. This will allow the Company to take an active marketing
role for special promotions, new products and so on.
ONE-ON-ONE CUSTOMER COMMUNICATIONS
The Internet provides a great opportunity for the Company to interact one-on-one
with its client base via e-mail.
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E-mail allows the Company, its clients and its hotel properties to interact over
distance and without worry about time zones or office hours. No party is bound
by the physical location of the other and e-mail allows business to be
transacted without the nuisance of "telephone tag" situations.
E-mail can also lead to savings for the Company in terms of reduced clerical
support and mailing costs.
CLIENT RESERVATION TRACKING
Clients like to be kept informed of, and in the case of requesting a hotel
booking, would like to know, the status of their reservations. The Company will
have the ability to instantly satisfy this need through the use of various
Internet tools.
The Company will keep an order's status readily available on its computer system
and by implementing an Internet-based client reservation tracking system, will
be able to reduce overhead by reducing the number of personnel required to staff
customer service lines. A good example of this type of service is Federal
Express' website that allows customers to track the progress of their package by
entering their waybill number.
THE COMPANY'S ONLINE CATALOGUE
The Company intends to offer its clients a virtual catalogue of hotel properties
and related travel products.
Using material provided by its roster of hotels, the Company will create
on-line, interactive, multimedia presentations which may include color photos,
animations, digital movies and music in order to give clients the most thorough
view of their hotel choices possible. Clients will be able to view guestrooms,
lobbies, and amenities as well as take short "sightseeing" trips to local
attractions. This multimedia experience will help give clients the most
information possible to make their booking decisions easier and more
pleasurable.
The value of an electronic catalogue is the convenience to customers of being
able to access it almost immediately rather than waiting for a copy to arrive by
mail. The Company's catalogue will also be available in a downloadable format so
that clients can view it off-line. Online ordering capabilities will be built in
to the catalogue. Moreover, the content of the Company's electronic catalogue
can be easily kept up to date.
USING FTP AND ELECTRONIC INFOMERCIALS
The Company may also provide product and service details using FTP (file
transfer protocol). A potential client could download an infomercial from the
Company's FTP site.
Some other ways that the Company could generate advertising for its site
include:
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- -- having trade or other publications review the site
- -- write articles about the site for submission to various publications
- -- contact trade directories to list the site
BUSINESS RELATIONSHIPS
The Company will seek to create partnerships with companies that may have some
synergy with the Company's business in order to cross-post each other's site
address. The Company's sales and marketing personnel will actively work to
develop inter-corporate relationships and spot new opportunities.
G. PROPRIETARY INFORMATION
To-date, the Company has made no cash expenditure on research and development.
The Company has not yet commenced operations and is not dependent on any
proprietary information and/or licensing agreements. Competing technology
enabling others to offer the same product and/or service as the Company already
exists. This sector is relatively easy to enter with affordable start-up and
operating costs.
The Company will not have any patents covering its products and there can be no
assurance that the Company will be able to protect its proprietary rights
thereto. In order to reduce the competitive forces, the Company intends to
enter into long-term service contracts with its business subscribers and
strategic partners. The commercial success of the Company may also depend upon
its products and services not infringing any intellectual property rights of
others.
H. REGULATIONS
To management knowledge, none of the Company's services are subject to material
regulations. However, the operations of the Company may require licenses and
permits from various governmental authorities. There can be no assurance that
the Company will be able to obtain all necessary licenses and permits that may
be required to carry out its business plan.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. MILESTONES
The Company is currently in its very early stage of development, and expects to
reach milestones more fully set forth below by entering into agreements with one
or more investors or investor groups. The Company currently requires $500,000
in capital to commence commercial operations, which it proposes to raise from
overseas financial institutions and/or wealthy individuals.
COMPLETION
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<TABLE>
<S> <C>
Formalize agreement with Apex May/15/99
Complete Private Placement ($500,000) June/30/99
Technical Development July/31/99
Recruitment of Participating Hotels October/31/99
Alpha Testing October/31/99
Staff Hiring and Training Aug/31/99
Beta Test Jan/31/00
Implementation of Marketing Plan Feb/29/00
Begin Online sales March/30/00
Develop Strategic Partnerships July/31/00
</TABLE>
In the event the Company has not achieved certain milestones, or consummated a
$500,000 financing by June 30, 1999, the Company will have (i) severe cash flow
and liquidity problems, and (ii) may cease at that point to be a viable
commercial entity. There can be no assurance that the Company will be able to
consummate such financing before such date, or that even if such financing is
consummated on or before such date, that the Company will not face liquidity
problems or that each financing will be on economic and other terms acceptable
to the Company.
On September 2, 1998 the Company entered into a Letter pursuant to which the
Company has the option to purchase 100% of the issued and outstanding voting
shares of Apex Canadian Holidays Ltd. Apex is a Canadian private company,
incorporated on October 24, 1996, with principal offices in British Columbia,
Canada, and is already engaged in the travel business. Pursuant to the terms of
the Letter of Intent, the closing date of the transaction shall be on or about
May 15, 1999, or as soon as possible thereafter and shall be predicated upon the
successful consummation of a U.S. $500,000 private placement of the Company's
shares of Common Stock.
Since its incorporation, the Company has successfully completed its first round
of financing pursuant to which it has raised approximately $241,500. The
Company has, therefore, substantially reached its first milestone (i.e. raising
$250,000). The Company proposes to complete its second round of financing, in
the amount of $500,000 by June 30, 1999. In addition, Lynx Internet and
Marketing has begun developing an internet shopping program for the Company's
proposed website. It is anticipated that the program will be completed and
tested by October 31, 1999.
B. FINANCING REQUIREMENTS
The Company will require a total equity investment of $500,000 to be made during
the first 24 months of operations. All proceeds raised will be used
specifically for start-up costs, purchase of capital assets, marketing and for
working capital.
<TABLE>
<S> <C> <C>
PHASE I -- START UP, YEAR 1
EQUIPMENT AND START-UP COSTS $ 35,000
</TABLE>
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<TABLE>
<S> <C> <C>
CONSULTING $ 40,000
SOFTWARE DEVELOPMENT $ 50,000
MARKETING $ 25,000
WORKING CAPITAL $100,000
--------
$250,000
--------
PHASE II -- FULL OPERATIONS, YEAR 2
WORKING CAPITAL $250,000
--------
TOTAL REQUIREMENTS $500,000
--------
--------
</TABLE>
** THE COMPANY'S AVAILABLE WORKING CAPITAL WILL BE SUFFICIENT TO MEET ITS
ADMINISTRATION COSTS FOR APPROXIMATELY 12 MONTHS. THE COMPANY WILL
SPEND THE FUNDS AVAILABLE TO IT TO SEEK THE BALANCE OF THE FINANCING
TO CARRY OUT ITS PROPOSED PLAN.
- -- The net proceeds from offerings that are not expended immediately may be
deposited in interest or non-interest bearing accounts, or invested in
government obligations, certificates of deposit, commercial paper, money
market mutual funds or similar investments. The Company is currently not
in arrears of the payment of dividends, interest, or principal payment on
borrowing, nor is the Company in default on any debt covenants at the
present time or during the most recently completed financial statements.
C. WORKING CAPITAL REQUIREMENTS
The Company does not anticipate having any cash flow or liquidity problems over
the next six months; however, in the event that the Company does not succeed in
consummating the said private placement financing on or before June 30, 1999,
the Company may be unable to operate and will have severe cash flow and
liquidity problems which may force it to immediately cease conducting business.
The Company is not in default or in breach of any note, loan, lease or other
indebtedness or financing arrangement requiring the Company to make payments.
There are no significant amounts of the Company's trade payables. The Company
is not subject to any unsatisfied judgments, liens or settlement obligations.
The following table sets forth selected audited financial information with
respect to the Company for the periods indicated. The data is derived from
financial statements prepared in accordance with accounting principles generally
accepted in Canada ("Canadian GAAP"), which differ in certain respects from
those in the United States. See Part F/S, Exhibit I (Note 8) of the audited
financial statements included elsewhere in this Filing for certain
reconciliation's to accounting principles generally accepted in the United
States ("US GAAP"). The selected financial data should be read in conjunction
with "Management's Discussion and Analysis or Plan of Operation," and the
audited financial statements and accompanying notes included elsewhere in this
Filing.
BALANCE SHEET DATA (IN U.S.$)
AS AT OCTOBER 23, 1998
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<TABLE>
<S> <C>
CASH $185,125
WORKING CAPITAL $175,705
TOTAL ASSETS $189,705
SHAREHOLDERS' EQUITY $177,705
INTERIM STATEMENT OF LOSS DATA (IN U.S.$)
FROM JUNE 17, 1998 TO OCTOBER 23, 1998
REVENUE $ --
EXPENSES $ 55,795
NET LOSS FOR THE PERIOD $ 55,795
NET LOSS PER COMMON SHARE $ (0.005)
SHARES OUTSTANDING 10,550,000
</TABLE>
CHANGE IN NUMBER OF EMPLOYEES
The Company does not expect to hire any additional employees until the
consummation of its purchase of Apex.
RISK FACTORS FORESEEN BY MANAGEMENT
a. SUCCESS OF BUSINESS - The Company may not be successful in its effort to
further its Business upon the acquisition of Apex's stock. Even if the Company
were to successfully meet the goals set forth in its business plan, that the
aforesaid goals may not be achieved within the respective time-frames set forth
therein. The limited extent of the Company's assets and the Company's stage of
development as well as the Company's limited operating history make it subject
to the risks associated with start-up companies.
b. MANAGEMENT - The Company's present management structure, although adequate
for the early stage of its operations, will likely require to be significantly
augmented as operations commence and expand. The ability of the Company to
recruit and retain capable and effective individuals is unknown, although there
are many such people within the industry worldwide. The Company's current
officers have no prior experience in the internet industry. The loss of the
services of its current officers, or the inability of the Company to attract,
motivate and retain highly qualified executive personnel in the future, could,
if and when the Company commences commercial operations, have a material adverse
effect upon the Company's operations.
c. COMPETITION - The Company intends to enter into markets which are
relatively new and are, therefore, difficult to predict in terms of the level of
demand for the Company's product and services. In addition, such markets are or
likely will be subject to intense
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competition from both private and public businesses nationally and/or around
the world, many of whom have greater financial and technical resources than
the Company. Such competition as well as any future competition may
adversely affect the Company's success in the marketplace. There can be no
assurance that the Company will be able to successfully compete therewith.
d. FINANCIAL ASSUMPTIONS -- The Company will rely on internally prepared
forecasted financial statements, which are predicated on certain assumptions,
including assumptions of revenue and expense and the occurrence of certain
future events, which in turn were based on management's considered assessment of
prevailing conditions and management's best estimates of future events. Should,
for example, product yields or prices deviate from the levels assumed in the
internal forecasted statements, then the Company's projected revenue and profits
will be adversely affected. Similarly, should the Company's actual costs exceed
the assumed levels, then the impact on the Company's projected profits would
likewise be adverse. In the final analysis, any return to an investor in the
Company will in large part be determined by management's ability to execute the
Company's plan as projected, and there can be no assurances provided of their
success with respect thereto. There can be no assurances whatsoever as to the
future financial performance of the Company. They are based upon current
information and certain extrinsic factors, some of which are beyond the control
of the Company, and/or subject to various assumptions, such as the Company's
ability to obtain additional financing and its ability to implement its plan.
e. ABSENCE OF OPERATING HISTORY -- The Company was incorporated on June 17,
1998 and has yet to commence operations. To date, the Company has attempted to
raise capital to fund the implementation of the initial goals. The Company has
no revenues from operations, has yet to produce a profit and, has no significant
assets. Failure to achieve projected rates of market penetration could
significantly affect the Company's pattern of revenues and expenses, and
accordingly future cash flow. Therefore, the Company's stockholders should be
prepared to bear the economic risk of losing their entire investment.
f. PUBLIC MARKET -- There is not now, and there may never be, a public market
of any kind for the securities issued by the Company, including the Shares.
There is no assurance that the price of the Shares in any market which may
develop will be greater than the offering price. As a result of these factors,
holders of the Company's Common Stock may not be able to liquidate their
investment.
g. PENNY STOCK -- The Company's securities may be deemed "penny stock" as
defined in Rule 3a51-1 of the Securities and Exchange Act of 1934, as amended.
Such a designation could have a material adverse effect on the development of
the public market for shares of the Company's common stock or, if such a market
develops, its continuation, since broker-dealers are required to personally
determine whether an investment in such securities is suitable for customers
prior to any solicitation of any offer to purchase these securities. Compliance
with procedures relating to sale by broker-dealers of "penny stocks" may make it
more difficult for purchasers of the Company's common stock to resell their
shares to third parties or to otherwise dispose of such shares.
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h. ABILITY TO RAISE ADDITIONAL CAPITAL - The Company may not be able to
raise additional funds for expansion and/or growth; and, if not available,
the investors may lose their entire investment. Additional financing may
come in the form of securities offerings or from bank financing. If
additional shares are issued to raise capital, existing shareholders will
suffer a dilution of their stock ownership in the Company, however, the book
value of their shares will not be diluted, provided additional shares are
sold at a price greater than that paid by any of them. Management of the
Company currently does not anticipate that subsequent Offerings will dilute
the book value of its common stock. In the event the Company has not
achieved certain milestones, or consummated a $500,000 financing by June 30,
1999, the Company will have (i) severe cash flow and liquidity problems, and
(ii) may cease at that point to be a viable commercial entity.
i. INDEMNIFICATION OF OFFICERS - Pursuant to the Company's Articles of
Incorporation, the Company's management is indemnified by the Company against
liabilities for any act performed in their capacity as agents of the Company
to the maximum extent permitted by Nevada law. Amounts paid in satisfaction
of such indemnification obligations will increase the Company's expenses, and
negatively impact its operating results.
j. POTENTIAL CONFLICTS OF INTEREST - There are various interrelationships
between the officers and directors of the Company which create conflicts of
interest that might be detrimental to the Company. The officers and
directors will not be able to devote full time to the affairs of the Company
as each has other business interests to which they devote some of their time.
k. NO FORESEEABLE DIVIDENDS - The Company does not anticipate paying
dividends on its Common Stock in the foreseeable future but plans to retain
earnings, if any, for the operation, growth and expansion of its business.
l. PERMITS AND LICENSES - The operations of the Company may require
licenses and permits from various governmental authorities. There can be no
assurance that the Company will be able to obtain all necessary licenses and
permits that may be required to carry out its plan.
m. INTELLECTUAL PROPERTY - The Company does not have any patents for its
technology and there can be no assurance that the Company will be able to
protect its proprietary rights from use by its competitors. The commercial
success of the Company may also depend upon its products and services not
infringing any intellectual property rights of others and upon no such claims
of infringement being made.
n. CURRENCY FLUCTUATION - The Company's potential operations make it
subject to foreign currency fluctuation and such fluctuation may adversely
affect the Company's financial position and results. Management will
undertake to hedge currency risks by negotiating its joint venture agreement
cash receipts in U.S. dollars. There can be no assurance that steps taken by
management to address foreign currency fluctuations will eliminate all
adverse effects and accordingly, the Company may suffer losses due to
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<PAGE>
adverse foreign currency fluctuation. Such fluctuations may also influence
future contribution margins.
o. CURRENT TECHNOLOGY - The technology necessary to create a service such
as the one the Company will be offering exists today and is readily
accessible, therefore, there would be ease of entry and exit for would-be
competitors.
p. INTERNET - Use of the Internet by consumers is at a very early stage of
development, and market acceptance of the Internet as a medium is subject to
a high level of uncertainty. The Company expects to experience significant
fluctuations in operating results in future periods due to a variety of
factors, including, but not limited to, (i) market acceptance of the Internet
as a medium for consumers, (ii) the Company's ability to create and deliver
internet content in order to attract users to its websites to purchase its
product and/or services, and to attract advertisers to its websites, (iii)
there can be no assurance that the Company's content will be attractive to a
sufficient number of users to generate significant revenues, (iv) intense
competition from other providers of related content over the Internet, (v)
delays or errors in the Company's ability to effect electronic commerce
transactions, (vi) the Company's ability to upgrade and develop its systems
and infrastructure in a timely and effective manner (vii) technical
difficulties, system downtime or Internet brownouts, (viii) the Company's
ability to attract customers at a steady rate and maintain customer
satisfaction, (ix) seasonality of the industry, (x) seasonality of
advertising sales, (xi) Company promotions and sales programs, (xii) the
amount and timing of operating costs and capital expenditures relating to
expansion of the Company's business, operations and infrastructure and the
implementation of marketing programs, key agreements and strategic alliances,
(xiii) the level of returns experienced by the Company; and (xiv) general
economic conditions and economic conditions specific to the Internet, on-line
commerce industry.
q. RISK ASSOCIATED WITH THE YEAR 2000 - The Year 2000 issue is the result
of computer programs written using two digits rather than four to define the
applicable year. As a result, date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations,
including, among others, a temporary inability to process transactions, send
invoices or engage in similar normal business activities. Management
believes that the Company does not have a material exposure to the Year 2000
issue with respect to its own information systems since its existing systems
correctly define the Year 2000. The Company intends to conduct an analysis
throughout its development stage to determine the extent to which its major
suppliers' systems (insofar as they relate to the Company's business) are
subject to the Year 2000 issue. The Company is currently unable to predict
the extent to which the Year 2000 issue will affect its suppliers, or the
extent to which it would be vulnerable to its suppliers' failure to remediate
any Year 2000 issues on a timely basis. In particular, most of the purchases
from the Company's Internet website will be made with credit cards and the
Company's operations may be materially adversely affected to the extent its
customers are unable to use their credit cards due to Year 2000 issues that
are not rectified by their credit card providers.
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<PAGE>
r. TELECOMMUNICATION - The Company's services are dependent on the use of
the Internet and telephone connections. Any interruptions, delays or capacity
problems experienced on the Internet or with the telephone connection could
adversely effect the ability of the Company to provide its services. The
telecommunications industry is subject to regulatory control. Any amendments
to current regulations could have a material adverse effect on the Company's
business, results of operations and prospects. The Company's business is
highly dependent on its computer and telecommunications systems for the
operation and quality of its services. The temporary or permanent loss of all
or a portion of either system, or significant replacement delays, for
whatever reason, could have a materially adverse effect on the Company's
business, financial condition and results of operations.
Note: In addition to the above risks, businesses are often subject to risks
not foreseen or fully appreciated by management. In reviewing this Filing,
potential investors should keep in mind other possible risks that could be
important.
RESULTS OF OPERATIONS
A. REVENUES - The Company is a development stage enterprise that has earned
no revenue since its inception. The Company believes that future revenues
will result largely from the sale of hotel bookings, advertising space on the
Company's website, and related sponsorship programs.
B. COST OF REVENUE - Since its inception, the Company has incurred no costs
of revenues. The Company expects that future cost of revenues will consist
of payments to third parties from resale of hotel rooms, ISPs', artists,
royalties, and profit participation payable to strategic alliance partners
and others.
C. PRODUCT DEVELOPMENT EXPENSES - Product development expenses consist
principally of website and other software engineering, graphic design,
certain non-recoverable advances to artists, artist relations,
telecommunications charges, and the cost of computer operations, including
related salaries, rent and depreciation, that support the Company's business.
D. SALES AND MARKETING EXPENSES - Since its inception, the Company has
incurred no sales and marketing costs. The Company expects that future costs
will consist primarily of costs associated with the Company's various
strategic alliances, external advertising, promotion, trade show, advertising
sales and personnel expenses associated with marketing of the Company's
website.
E. GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative
expenses currently consist of management consulting fees, accounting, legal
and expenditures for applicable overhead costs. The Company expects general
and administrative expenses to continue to increase in absolute dollars as
the Company expands its staff and incurs additional costs related to the
growth of its business.
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F. LACK OF COMMITMENTS AND ORDERS - There are currently no commitments for
any of the Company's products or services.
ITEM 3. DESCRIPTION OF PROPERTY
The Company does not presently own or lease any properties and at this time
has no agreements to acquire any properties. The Company intends or attempt
to acquire assets or a business for cash and/or in exchange for its
securities which assets or business is determined to be desirable for its
objectives.
The Company's office space is provided by Joist Management Limited on a rent
free basis and it is anticipated that this arrangement will remain until such
time as the Company successfully consummates a merger or acquisition.
Management believes that this space will meet the Company's needs for the
foreseeable future. The Company plans to move to different facilities as its
customer base expands and it upgrades equipment.
The Company has no investments in real estate, securities, or other forms of
property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's issued and outstanding shares of Common Stock as
of January 31, 1999 by (i) each person known to the Company beneficially to
own 5% or more of the shares of its Common Stock, (ii) each of the Company's
directors, (iii) each of the Company's executive officers named in the tables
below, and (iv) all directors and officers as a group. The persons named in
the tables below have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN NUMBER OF SHARES TITLE OF PERCENT OF CLASS
BENEFICIAL OWNERS BENEFICIALLY CLASS BENEFICIALLY OWNED
OWNED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NONE
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE NUMBER OF SHARES TITLE OF PERCENT OF CLASS
OFFICERS BENEFICIALLY CLASS BENEFICIALLY OWNED
OWNED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CHUI KEUNG HO 500,000 Common 4.74%
30/F SOUTHORN CENTRE,
HENNESSY ROAD,
WAN CHAI, HONG KONG;
PH (852) 2952-9988
Chief Executive Officer, President and Sole
Director
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
All Directors and Officers as Group (2) 500,000 Common 4.74%
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- - None of the Officer and Directors as a group are holders of any options,
warrants, right conversion privileges or similar items.
- - The Company has not granted any options, warrants, rights or conversion
privileges. The Company is unaware of any voting trust or similar
agreement among its shareholders.
- - Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to stock options and warrants currently exercisable or exercisable within
60 days are deemed to be outstanding for calculating the percentage
ownership of the person holding such options and the percentage ownership
of any group of which the holder is a member, but are not deemed
outstanding for calculating the percentage of any other person. The
persons named in the table have sole voting and investment power with
respect to all shares of capital stock shown beneficially owned by them.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Pursuant to the Company's Bylaws, each officer and director will serve until
the next annual meeting of the shareholders or until their death,
resignation, retirement, removal, or disqualification, or until their
successors have been duly elected and qualified. Vacancies in the existing
Board of Directors are filled by majority vote of the remaining Directors.
Officers of the Company serve at the will of the Board of Directors. There
is no family relationship between any executive officer and director of the
Company.
The principal Executive Officers and Directors of the Company are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
NAME AGE DIRECTOR TERM(S)
AND OFFICER
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Chui Keung Ho 39 Chief Executive Officer Since June 1998
and President
- ------------------------------------------------------------------------------
Shelley James 39 Treasurer, Secretary and Since June 1998
Chief Financial Officer
- ------------------------------------------------------------------------------
</TABLE>
CHUI KEUNG HO, a businessman, age 39 is the Chief Executive Officer,
President and a Director of the Company. For the last 10 years Mr. Ho has
been involved in strategic planning, start-up operations and business
management for Practical Brand Plastic Moulding Ltd., a Hong Kong company and
Okane International Enterprises, Inc., a Nevada corporation. Mr. Ho has
extensive knowledge in manufacturing and importing/exporting businesses in
Hong Kong and China.
30
<PAGE>
SHELLEY JAMES, a businesswoman, age 39, is the Chief Financial Officer,
Secretary/Treasurer and a Director of the Company. Miss James has a
background in business administration and marketing and for the past 15 years
has been involved in marketing management, strategic planning and corporate
administration for small and medium-sized private and public companies. For
example: International Aqua Foods Ltd., 1995 to present (a multi-national
fish farming company); Business consultation, 1994 to 1995 (professional
business consultation); Nelson Juvenile Product Inc., 1988 to 1994
(multi-national import and export company); Kazari International Inc., 1998
(a start-up internet company). Miss James received a Diploma of Technology
from the BC Institute of Technology in 1985 and a Masters of Business
Administration from Simon Fraser University, British Columbia, Canada, in
1994.
- - If and when the Company commences commercial operations, the Company
intends to put in place at the corporate level an experienced management
and technical/operational team capable of meeting the needs of the
organization as it grows and develops, and of implementing the various
aspects of the plan discussed herein.
- - None of the Company's current Officers or Directors have ever worked for or
managed a fully operational company in the same business or industry as the
Company or in a related business or industry
- - The Directors and Officers of the Company's management are associated with
other firms involved in a range of business activities. Consequently,
there are potential inherent conflicts of interest in their acting as
Officers and Directors of the Company.
- - The Officers and Directors of the Company are now and may in the future
become shareholders, Officers or Directors of other companies which may be
formed for the purpose of engaging in business activities similar to those
conducted by the Company. Accordingly, additional direct conflicts of
interest may arise in the future with respect to such individuals acting on
behalf of the Company or other entities. Moreover, additional conflicts of
interest may arise with respect to opportunities which come to the
attention of such individuals in the performance of their duties or
otherwise. The Company does not currently have a right of first refusal
pertaining to opportunities that come to the Directors and Officers
attention insofar as such opportunities may relate to the Company's
proposed business operations.
- - The Officers and Directors are, so long as they are Officers or Directors
of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their
attention, either in the performance of their duties or in any other
manner, will be considered opportunities of, and be made available to, the
Company. A breach of this requirement will be a breach of the fiduciary
duties of the Officer or Director. If the Company or the companies in
which the Officers and Directors are affiliated with both desire to take
advantage of an opportunity, then said Officers and Directors would abstain
from negotiating and voting upon the opportunity. However, all Directors
may still
31
<PAGE>
individually take advantage of opportunities if the Company should
decline to do so. Except as mentioned, the Company has not adopted
any other conflict of interest policy with respect to such transactions.
ITEM 6. EXECUTIVE COMPENSATION
- - As of to-date the Company has no compensation, incentive stock option
and/or bonus plans for its Directors and/or Officers. However, the
Company intends to develop and implement such programs in the future.
- - As of the date of this report no Officer or Director is compensated
directly by the Company. The Company did not pay any bonuses, or grant any
stock awards, options or stock appreciation rights, or pay any other form
of compensation or perquisites. It is anticipated that, if and when the
$500,000 financing is consummated (anticipated to be on or before June 30,
1999), the Company will commence paying industry-standard salaries to all
of its Officers.
- - The Company is not a party to any employment or consulting agreements
between the Company and any Executive Officers. The Company presently
anticipates that, at some point after the consummation of the $500,000
financing, if and when this occurs, the Company would enter into an
employment agreement with it Executive Officers.
- - It is possible that persons associated with management may refer a
prospective merger or acquisition candidate to the Company. In the event
the Company consummates a transaction with any entity referred by
associates of management, such associate may be compensated for his or her
referral in the form of a finder's fee. It is anticipated that this fee
will be either in the form of common stock issued by the Company as part of
the terms of the proposed transaction, or will be in the form of cash
consideration. The amount of such finder's fee will be negotiated on an
"arm's length" basis between the respective parties. Any such arrangement
is expected to be comparable to consideration normally paid in like
transactions. No member of management of the Company will receive any
finder's fee, either directly or indirectly, as a result of their
respective efforts to implement the Company's business objectives outlined
in this Filing.
None of the Directors or Executive Officers of the Company or any associates or
affiliates of the Company, are or have been indebted to the Company at any time
since June 1998.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
COMPANY'S FOUNDERS
In June 1998, the Company issued 500,000 shares of Common Stock to the Founder,
Chui Keung Ho, President of the Company, for aggregate proceeds of $500. The
stock issuance was approved by the written consent of the Directors of the
Company on June 17, 1998.
32
<PAGE>
APEX TRAVEL LTD.
The Company has an option to acquire 100% of Apex's issued and outstanding
shares of Common Stock. Per the Letter of Intent, the closing date for the
acquisition shall be on or about May 15, 1999, or as soon as possible thereafter
and shall be predicated upon the successful consummation of a $500,000 private
placement of the Company shares of Common Stock. The acquisition will be
finalized by the execution of a definitive Agreement containing among other
things, terms and conditions which are presently agreed to by the parties in the
Letter of Intent.
As of the date of this filing, there are no directors, officers, key personnel
or principal stockholders related by blood or marriage, except for the
following:
- - Chui Keung Ho, president and director of the Company, is related by blood
to David Ho, president and director of Apex Travel Ltd.
- - L & L Developments Inc. is a shareholder of Apex Travel Ltd. In turn,
David Ho is a director and officer, but not a shareholder, of L & L
Developments Inc. The shareholders of L & L Developments Inc. are not
related and/or affiliated to the Company, and do not hold any stock in the
Company.
FUTURE TRANSACTIONS
It is also contemplated that the Company may in the future enter into
transactions with management, directors and affiliates which, even though may
involve conflicts of interest, shall have been deemed to be fair and equitable
transactions in the best interest of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, of which 10,550,000 were issued and outstanding as of January
31, 1999.
The holders of Common Stock (i) have equal ratable rights to dividends, when,
as and if declared by the Board of Directors of the Company; (ii) are
entitled to vote at all meetings of shareholders; (iii) to share ratably in
all of the assets of the Company available for distribution or winding up of
the affairs of the Company; (iv) do not have preemptive subscription or
conversion rights, and there are no redemption or sinking fund applicable
thereto; and (v) are entitled to one non-cumulative vote per share, on all
matters which shareholders may vote on at all meetings of shareholders.
Since the holders of shares of Common Stock do not have cumulative voting
rights, the holders of more than 50% of such outstanding shares, voting for
the election of directors, can elect all of the directors to be elected, if
they so choose, and, in such event, the holders of the remaining shares will
not be able to elect any of the Company's directors.
33
<PAGE>
These securities carry NONE of the following:
- - Cumulative voting rights
- - Other special voting rights
- - Preemptive rights to purchase in new issues of shares
- - Preference as to dividends or interest
- - Restriction on the declaration or payment of dividends
- - Preference upon liquidation
- - Other special rights or preferences
- - Convertible provisions
- - Securities are notes or other types of debt securities
To-date there are no shares of Preferred Stock authorized and/or issued.
TRANSFER AGENT
The transfer agent for the shares of Common Stock is Interwest Transfer Company,
Inc., 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah, 84117.
34
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
Presently, the Company's stock is not listed for sale on any exchange or trading
medium. The Company intends to seek the listing of its Common Stock on the OTC
Electronic Bulletin Board upon the effectiveness of this Filing. Until such
time, there is no public market for the Company's Common Stock.
HOLDERS
There are currently 38 holders of the Company's Common Stock.
DIVIDENDS
THE COMPANY HAS NEVER DECLARED OR PAID DIVIDENDS ON THE COMMON STOCK. MOREOVER,
THE COMPANY CURRENTLY INTENDS TO RETAIN ANY FUTURE EARNINGS FOR USE IN ITS
BUSINESS AND, THEREFORE, DOES NOT ANTICIPATE PAYING ANY DIVIDENDS ON THE COMMON
STOCK IN THE FORESEEABLE FUTURE.
RESALE RESTRICTIONS
The offering price of the Shares of Common Stock sold by the Company was
arbitrarily determined by the management of the Company. The offering price
does not bear any relationship to assets, book value, or earnings of the
Company.
- -- No restrictions or limitations on resale are believed to apply to the
securities issued, other than restrictions on resale which may apply under
the securities or "Blue Sky" laws of certain states in which such resale
may occur. f such restrictions.
- -- There are no independent bank or savings and loan association or other
similar depository institution acting as escrow agent for proceeds escrowed
until minimum proceeds are raised.
ITEM 2. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened legal proceedings as of
the date of this Filing. No federal, state or local governmental agency is
presently contemplating any proceeding against the Company (5%). No director or
executive officer or owner of record or beneficially of more than five percent
(5%) of the Company's Common Stock is a party adverse to the Company or has a
material interest adverse to the Company in any legal or quasi-legal proceeding.
However, the Company may, from time to time, be subject to legal proceedings
arising from its undertakings in the ordinary course of business.
35
<PAGE>
There has been to date no petition under the Bankruptcy Act or any State
insolvency law filed by or against the Company or its Officers, Directors or
other key personnel.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING
There have been no changes in, or disagreements with, the Company's independent
accountant. The Company's principal independent accountant has not resigned or
been dismissed. During June 1998, the month of the Company's organization, Mike
Bingham, Chartered Accountants, of Vancouver, British Columbia, Canada was
engaged as the principal accountant to audit the Company's financial statements.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- -- In June 1998, the Company issued 1,500,000 shares of its Common Shares to
its initial shareholders for a cash consideration of $1,500.00 ($0.001 per
share). In July 1998, the Company issued an additional 9,000,000 shares
of its Common Stock for a cash consideration of $90,000 ($0.01 per share).
- -- Thereafter, in October 1998 the Company issued 50,000 common shares for a
cash consideration of $150,000 ($3.00 per share).
As of January 31, 1999, 10,550,000 shares of the Company's Common Stock have
been issued and sold pursuant to Rule 504 of Regulation D promulgated under
the Securities Act of 1933, as amended. As permitted by Rule 504,
certificates for these securities were issued without restrictive legends.
However, 500,000 of these shares were purchased by Chui Keung Ho, one of the
directors and officers of the Registrant and may only be publicly sold
pursuant to Rule 144. The existing and the offered securities have been and
are being offered and sold pursuant to the exemption available under Rule
504. Securities issued pursuant to Rule 504 are not "restricted securities"
as such term is defined in Rule 144. Accordingly, with the exception of
shares owned by "affiliates" (as such term is defined in Rule 144) of the
Company, all of the Company's shares of Common Stock that will exist after
the approval, if granted, of the Company's application to have its shares of
Common Stock traded on the OTC Bulletin Board, may be resold in brokerage
transactions without restriction. Shares owned by affiliates, which are
restricted securities, are so restricted for at least an initial period of
one year from the purchase thereof. Shares owned by affiliates may then be
sold in brokerage transactions subject to the volume limitation requirements
of Rule 144, which provides that persons owning control stock would be
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) 1% of the then outstanding shares of Common
Stock, or (ii) the average weekly reported trading volume on all national
securities exchanges, the NASDAQ National Market, and the OTC Bulletin Board
during the four calendar weeks preceding such sale. Any "free trading" and
unrestricted shares which may be owned by "affiliates" of the issuer are
likewise subject to the foregoing limitation on resale without regard to when
they were acquired or how long they have been held. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity
limitation by a person who
36
<PAGE>
has satisfied a two year holding period and who is not, and has not been for
the preceding three months, an affiliate of the Company. If a substantial
number of shares owned by the initial shareholders were sold in the market, the
market price of the Common Stock would be adversely affected
There is not now, and there may never be, a public market of any kind for the
securities issued by the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
a. The Articles of Incorporation of the Registrant, together with its By-laws,
provide that the Company shall indemnify its officers and directors, and
may indemnify its other employees and agents, to the fullest extent
permitted by applicable law.
b. Under certain circumstances, the laws of the State of Nevada permit, and in
some cases require, corporations to indemnify officers, directors, agents
and employees who have been a party to, or are threatened to be made a
party to, litigation.
Under the Company's Articles of Incorporation, and as permitted by the laws of
the State of Nevada, a director is not liable to the Company or its shareholders
for damages for breach of fiduciary duty. Such limitation of liability does
not affect liability for (i) acts or omissions not in good faith or which
involve intentional misconduct, fraud, or a knowing violation of the law, (ii)
any transaction from which the director directly or indirectly derived an
improper personal benefit, (iii) the payment of any unlawful distribution, or
(iv) violations of federal and state securities laws
37
<PAGE>
PART F/S
INTERIM FINANCIAL STATEMENTS
CONTENTS:
Interim Balance Sheet
Interim Statement of Loss and Deficit
Interim Statement of Shareholders' Equity
Interim Statement of Changes in Financial Position
Notes to the Interim Financial Statements
Comments by Auditor for U.S. Readers on
Canada-U.S. Reporting Difference
38
<PAGE>
Auditor's Report
To the Shareholders
Zstar Enterprises, Inc.
I have audited the interim balance sheet of Zstar Enterprises, Inc. as at
October 23, 1998 and the interim statements of loss and deficit, shareholders'
equity and changes in financial position for the period from June 17, 1998 to
October 23, 1998. These interim financial statements are the responsibility of
the Company's management. My responsibility is to express an opinion on these
interim financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards
in Canada. Those standards require that I plan and perform and audit to
obtain reasonable assurance whether the interim financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the interim financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall interim financial statement presentation.
In my opinion, these interim financial statements present fairly, in all
material respects, the financial position of the Company as at October 23, 1998
and the results of its operations and the changes in its financial position for
the period form June 17, 1998 to October 23, 1998 in accordance with generally
accepted accounting principles in Canada.
Vancouver, British Columbia (/s/)
November 2, 1998 Chartered Accountant
39
<PAGE>
INTERIM BALANCE SHEET
AS AT OCTOBER 23, 1998
ASSETS
<TABLE>
<CAPTION>
$
-------
<S> <C>
CURRENT
Cash 185,125
Prepaid expenses 2,580
-------
INCORPORATION COSTS 2,000
-------
189,705
-------
-------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 12,000
-------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (NOTE 3)
Authorized -30,000,000 common shares with par value of $.001
Issued -10,550,000 common shares 10,550
CONTRIBUTED SURPLUS (NOTE 3) 222,950
DEFICIT (55,795)
-------
177,705
-------
Total Liability & Equity 189,705
-------
</TABLE>
Approved by the Board
/s/ Director
- ----------------------------------------------
/s/ Director
- ----------------------------------------------
40
<PAGE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
INTERIM STATEMENT OF LOSS AND DEFICIT
FOR THE PERIOD FROM JUNE 17, 1998 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
$
-------
<S> <C>
EXPENSES
Audit 2,000
Bank charges 177
Legal 5,000
Management and consulting fees (Note 2) 48,618
-------
NET LOSS FOR THE PERIOD AND DEFICIT, END OF PERIOD 55,795
-------
</TABLE>
41
<PAGE>
INTERIM STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FROM JUNE 17 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
Par Contributed Shareholder
# of Common Price per Value Surplus Accumulated Equity
Shares Share (Note 3) (Note 3) Deficit (Deficit)
----------- --------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Common shares issued for cash $ $ $ $
- June 1998 (on inception) 1,500,000 $.001 1,500 -- -- 1,500
- July 1998 9,000,000 $ .01 9,000 81,000 -- 90,000
- October 1998 50,000 $3.00 50 149,950 -- 150,000
Share issue costs for the period -- (8,000) -- (8,000)
Net loss for the period (55,795) (55,795)
---------- -------- ----------- ----------- -----------
10,550,000 10,550 222,950 (55,795) 177,705
---------- -------- ----------- ----------- -----------
---------- -------- ----------- ----------- -----------
</TABLE>
42
<PAGE>
INTERIM STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD FROM JUNE 17, 1998 TO OCTOBER 23, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
$
--------
<S> <C>
OPERATING ACTIVITIES
Net loss for the period (55,795)
Net change in non-cash working capital balances 9,420
--------
(46,375)
--------
FINANCING ACTIVITIES
Issuance of capital stock 241,500
share issue costs (8,000)
--------
INVESTING ACTIVITY
Incorporation costs (2,000)
--------
Change in cash during the period, and cash, end of period 185,125
--------
--------
</TABLE>
43
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
OCTOBER 23, 1998
(in U.S. Dollars)
NOTE 1 INCORPORATION AND OPERATIONS
The Company was incorporated on June 17, 1998 in Nevada, U.S.A.
The Company was organized with the intent to serve as a holding company which
will acquire and/or form joint venture with corporate entities conducting
various types of business throughout the world. While growth of the Company
may involve future programs yet to be determined, management has identified
and secured certain initial target acquisitions and joint ventures. The
Company currently has no subsidiaries and has not yet commenced operations.
NOTE 2 RELATED PARTY TRANSACTION
Joist Management Ltd. is related by management contract to provide
administrative and general office services to the Company at a rate of
$10,000 per month until May 31, 1999. None of the shareholders, officer or
directors of Joist Management Ltd. are shareholders of Zstar Enterprises,
Inc. During the period, the Company was charged $47,420 for administrative
services.
NOTE 3 CAPITAL STOCK AND CONTRIBUTED SURPLUS
During the period, the Company issued the following common shares:
<TABLE>
<CAPTION>
Total Capital
Cash Stock Contributed
# of Shares Proceeds at Par Value Surplus
<S> <C> <C> <C>
1,500,000 at $0.001 $ 1,500 $ 1,500 $ -
9,000,000 at $0.01 90,000 9,000 81,000
50,000 at $3.00 150,000 50 149,950
-------- ------- --------
$241,500 $10,550 $230,950
Less share issue costs: 8,000 - $ 8,000
-------- ------- --------
$233,500 $10,550 $222,950
-------- ------- --------
-------- ------- --------
</TABLE>
44
<PAGE>
NOTES TO INTERIM FINANCIAL STATEMENTS
OCTOBER 23, 1998
(in U.S. Dollars)
NOTE 4 PROPOSED ACQUISITION OF APEX CANADIAN HOLIDAYS LTD.
On September 2, 1998, the Company signed a letter of intent to acquire 100%
of the shares of Apex Canadian Holidays Ltd., a Canadian company, for cash
consideration of $50,000. A condition of the stock purchase is that Zstar
Enterprises, Inc. first raise $500,000 through a private placement. The
letter of intent is not binding on either party.
NOTE 5 INCOME TAXES
The Company has an interim net loss and other expenditures which may give
rise to future income tax benefits. The potential benefit from these losses
has not been reflected in these financial statements.
NOTE 6 LOSS PER SHARE
Loss per share information has not been disclosed as it is not considered
meaningful at this stage of the Company's development.
NOTE 7 CONTINUING OPERATIONS
These financial statements have been based upon accounting principles which
pressure the realization of assets and settlement of liabilities as they
become due in the course of continuing operations. The Company's ability to
maintain operations is contingent upon successful completion of additional
financing arrangements.
NOTE 8 RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
STATES
There are no significant differences between Canadian and U.S. accounting
principles requiring adjustment to the financial statements of the Company
except for the following additional disclosure for development stage
companies.
Under U.S. GAAP, the deficit shown on the balance sheet in the shareholders'
equity section would be titled to reflected that this was the accumulated
deficit during the development stage of the Company. This does not change the
reported deficit, only the description thereof.
45
<PAGE>
COMMENTS BY AUDITOR FOR U.S. READERS
ON CANADA-U.S. REPORTING DIFFERENCE
to the Shareholders,
Zstar Enterprises, Inc.
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the Company's ability to continue as a going concern,
such as those described in Note 7 to the interim financial statements of
Zstar Enterprises, Inc. for the period from June 17, 1998 to October 23,
1998. My report to the shareholders dated November 2, 1998 is expressed in
accordance with Canadian reporting standards which do not permit a reference
to such events and conditions in the auditor's report when these adequately
disclosed in the financial statements.
Vancouver, British Columbia /s/
November 2, 1998 Chartered Accountant.
46
<PAGE>
PROFORMA FINANCIAL STATEMENTS REFLECTING INTENDED ACQUISITION OF APEX
PROFORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(in U.S. dollars)
CONTENTS:
Proforma Interim Consolidated Balance Sheet
Proforma Interim Consolidated Statement of Loss and Deficit
Proforma Interim Consolidated Statement of Shareholders' Equity
Proforma Interim Consolidated Statement of Changes in Financial Position
NOTES TO THE PROFORMA INTERIM CONSOLIDATED FINANCIAL STATEMENTS
47
<PAGE>
PROFORMA INTERIM CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1998
( in U.S. Dollars)
ASSETS
<TABLE>
<CAPTION>
Current $
<S> <C>
Cash 599,426
Accounts receivable 65,656
Prepaid expenses 21,900
-------
686,982
-------
CAPITAL ASSETS (NET) 3,317
GOODWILL 60,444
INCORPORATION COSTS 2,000
-------
752,743
-------
-------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 155,238
-------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (NOTE 6)
Authorized -30,000,000 common shares with par value of $.001
Issued -10,716,667 common shares 10,716
CONTRIBUTED SURPLUS (NOTE 6) 722,784
DEFICIT (135,995)
-------
597,505
-------
752,743
-------
-------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
48
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF LOSS AND DEFICIT
FOR THE PERIOD FROM JUNE 17, 1998 TO DECEMBER 31, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
EXPENSES $
<S> <C>
Audit 2,000
Bank charges 377
Legal 20,000
Management and consulting fees (note 5) 113,618
-------
135,995
-------
-------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
49
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD FORM JUNE 17, 1998 TO DECEMBER 31, 1998
(in U.S. Dollars)
<TABLE>
<CAPTION>
Par Contributed Shareholder
# of Common Price per Value Surplus Accumulated Equity
Shares Share (Note 6) (Note 6) Deficit (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Common shares issued for cash $ $ $ $
- - June 1998 1,500,000 $.001 1,500 - - 1,500
(on inception)
- - July 1998 9,000,000 $.01 9,000 81,000 - 90,000
- - October 1998 50,000 $3.00 50 149,950 - 150,000
- - May 1999 166,667 $3.00 166 499,834 - 500,000
Share issue costs for the period - (8,000) - (8,000)
Net loss for the period - (135,995) (135,995)
---------- ------ ------- -------- --------
10,716,667 10,716 722,784 (135,995) 597,505
---------- ------ ------- -------- --------
---------- ------ ------- -------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
50
<PAGE>
PROFORMA INTERIM CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE PERIOD FROM JUNE 17, 1998 TO DECEMBER 31, 1998
( in U.S. Dollars)
<TABLE>
<CAPTION>
OPERATING ACTIVITIES $
<S> <C>
Net loss for the period (135,995)
Net change in non-cash working capital balances 9,420
--------
(126,575)
--------
FINANCING ACTIVITIES 741,500
Issuance of capital stock (8,000)
--------
Share issue costs 733,500
--------
INVESTING ACTIVITIES
Assets acquired on business acquisition (50,000)
Incorporation costs (2,000)
--------
(52,000)
--------
Change in cash during the period 554,925
Cash acquired on business acquisition 44,501
--------
Cash, end of period 599,426
--------
--------
</TABLE>
51
<PAGE>
The accompanying notes are an integral part of these financial statements
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 1998
(in U.S. Dollars)
NOTE 1 PURPOSE OF PROJECTION
The purpose of this projection is to illustrate the effect of the proposed
acquisition (Note 4) as if it occurred on or about December 31, 1998.
Specifically, it has been assumed that $500,000 is raised through a private
placement and the Company paid $ 50,000 for the Apex acquisition. The letter of
intent is non-binding.
Included in the projection are the actual results for the interim period ended
October 23, 1998 for which audited financial statements have been prepared.
Management has estimated expenditures for the Proforma period from October 24,
1998 to December 31, 1998 and combined these with October 23, 1998 expenditures
to arrive at December 31, 1998 period to date figures. Management prepared this
projection on October 31, 1998.
The Company will be following the consolidation method in accounting for its
proposed investment in Apex Canadian Holidays Ltd. For purposes of these
Proforma financial statements, the Company has included the actual balance sheet
for Apex Canadian Holidays Ltd. as at its year end date of February 28, 1998 as
an estimate of its Proforma balance sheet on December 31, 1998.
Since this projection is based on assumptions regarding future events, actual
results will vary from the information presented and the variations may be
material.
NOTE 2 INCORPORATION AND NATURE OF BUSINESS
The Company was incorporated on June 17, 1998 in Nevada. U.S.A.
The Company was organized with the intent to be a holding company which will
acquire and/or form joint ventures with corporate entities conducting various
types of businesses throughout the world.
NOTE 3 BASIS OF CONSOLIDATION
These Proforma consolidated interim financial statements include the accounts of
Zstar Enterprises, Inc. and its 100% subsidiary, Apex Canadian Holidays Ltd.
NOTE 4 ACQUISITION OF APEX CANADIAN HOLIDAYS LTD.
On December 31, 1998 the Company proposes to purchase 100% of the common shares
of Apex Canadian Holidays Ltd. for cash consideration of $50,000. The
underlying assets and liabilities acquired have been assigned the following
values:
52
<PAGE>
<TABLE>
<S> <C>
Cash $ 44,501
Accounts receivable 65,656
Prepaid expenses and deposits 19,320
Capital assets 3,317
Goodwill 60,444
Accounts payable and accrued liabilities (143,238)
--------
$ 50,000
--------
--------
</TABLE>
The investment in Apex Canadian Holidays Ltd. exceeded the book value of the net
assets acquired by $52,444. This excess has been allocated to goodwill and is
being amortized over 40 years.
NOTE 5 RELATED PARTY TRANSACTION
Joist Management Ltd. is related by management contract to provide
administrative and general office services to the Company at a rate of $ 10,000
per month until May 31, 1999. None of the shareholders, officers or directors
of Joist Management Ltd. are shareholders of Zstar Enterprises, Inc. During the
period, the Company was charged $ 112,720 for administrative services.
NOTE 6 CAPITAL STOCK AND CONTRIBUTED SURPLUS
During the period, the Company issued the following common shares:
<TABLE>
<CAPTION>
Total Capital
Cash Stock Contributed
# of Shares Proceeds At Par value Surplus
----------- -------- ------------ -----------
<S> <C> <C> <C>
1,500,000 at $0.001 $ 1.500 $ 1,500 $ --
9,000,000 at $0.01 90,000 9,000 81,000
50,000 at $3.00 150,000 50 149,950
166,667 at $3.00 500,000 166 499,834
-------- ------- --------
$741,500 $10,716 $730,784
Less shares issue costs: 8,000 -- 8,000
-------- --------
</TABLE>
53
<PAGE>
<TABLE>
<S> <C> <C> <C>
$733,500 $10,716 $722,784
-------- ------- --------
-------- ------- --------
</TABLE>
54
<PAGE>
NOTE 7 INCOME TAXES
The Company has an interim net loss and other expenditures which may give rise
to future income tax benefits. The potential benefit from these losses has not
been reflected in these financial statements.
NOTE 8 LOSS PER SHARE
Loss per share information has not been disclosed as it is not considered
meaningful at this stage of the Company's development.
NOTE 9 CONTINUING OPERATIONS
These financial statements have been based upon accounting principles which
presume the realization of assets and settlement of liabilities as they become
due in the course of continuing operations. The Company's ability to maintain
operations is contingent upon successful completion of additional financing
arrangements.
55
<PAGE>
PART III
ITEM 1 INDEX TO EXHIBITS
EXHIBIT # DESCRIPTION
--------- -----------
Exhibit 3(i) Articles of Incorporation
Exhibit 3(ii) By-laws
Exhibit 4.1 Specimen stock certificate evidencing shares of
Common Stock
Exhibit 4.2 Form of Subscription Agreement used by the
Company
Exhibit 10 Management Agreement dated June 20, 1998
Exhibit 11 Statement re: computation per share earnings is
stated elsewhere in this Filing
Exhibit 27 Financial Data Schedule
Exhibit 99 Letter of Intent with Apex Canadian Holidays
Ltd. dated September 2, 1998
56
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
ZSTAR ENTERPRISES, INC.
/s/ Chui Keung Ho
---------------------------------------
Chui Keung Ho, President
Date: February 1, 1999
57
<PAGE>
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
OF
ZSTAR ENTERPRISES, INC.
I, the person hereinafter named as incorporator, for the purpose of associating
to establish a corporation under the provisions and subject to the requirements
of Title 7, Chapter 78 of Nevada Revised Statutes, and the acts amendatory
thereof, and hereinafter sometimes referred to as the General Corporation Law of
the State of Nevada, do hereby adopt and make the following Articles of
Incorporation.
ARTICLE I.
NAME
The name of this corporation is Zstar Enterprises, Inc.
ARTICLE II.
AGENT FOR SERVICE OF PROCESS
The name of this corporation's initial agent in the State of Nevada for services
of process is CSC Services of Nevada, Inc. The address of the agent is 502 East
John Street, Carson City, Nevada, 89706.
ARTICLE III.
STOCK
The corporation is authorized to issue only one class of shares of stock, to be
known as "common stock." The total number of shares that the corporation is
authorized to issue is Thirty Million (30,000,0000), all of which are of a par
value of $0.001 each.
ARTICLE IV.
DIRECTORS
The governing board of the corporation shall be styled as a 'Board of
Directors," and any member of the Board shall be styled as a "Director."
The number of members constituting the first Board of Directors of the
corporation is two(2). The names of post office boxes or street addresses,
either residence or business, of said members are as follows:
Chui Keung Ho 30/F Southorn Centre, 130 Hennessy Road, Wan Chai, Hong
Kong
Roberto Chu Prolong Leticia, 941 Dept 202, Peru
The number of Directors of the corporation may be increased or decreased in the
manner provided in the Bylaws of the corporation; provided, that the number of
directors shall never be less than one. In the interim between elections of
directors by stockholders entitled to vote, all vacancies, including vacancies
caused by an increase in the number of directors and including vacancies
resulting from the removal of directors by the stockholders entitled to vote
which are not filled by said stockholders, may be filled by the remaining
directors, though less than a quorum.
<PAGE>
ARTICLE V.
LIMITATION OF DIRECTOR LIABILITY
The personal liability of the directors of the corporation is hereby eliminated
to the fullest extent permissible under the General Corporation Law of the State
of Nevada, as the same may be amended and supplemented.
ARTICLE VI
INDEMNIFICATION
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law"), indemnify any and all persons whom it shall have power
to indemnify under the Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by the Law. The
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
ARTICLE VII.
INCORPORATOR
The name of post office box or street address, either residence or business of
the incorporator signing these Articles of Incorporation are as follows:
Kellie E. Davidson c/o Jones, Day, Reavis & Pogue
555 West 5th Street, Suite 4600
Los Angeles, Ca., 90013
IN WITNESS WHEREOF, I do hereby execute these Articles of Incorporation on June
16, 1998.
S/ Kellie E. Davidson
_________________________
Kellie E. Davidson, Incorporator
<PAGE>
EXHIBIT 3(ii)
BYLAWS
OF
ZSTAR ENTERPRISES, INC.
TABLE OF CONTENTS
ARTICLE I Offices
Section 1. Principal Executive Office
Section 2. Other Offices
ARTICLE II Shareholders
Section 1. Place of Meetings
Section 2. Annual Meetings
Section 3. Special Meetings
Section 4. Notice of Annual or Special Meetings
Section 5. Quorum
Section 6. Adjourned Meetings and Notice Thereof
Section 7. Voting
Section 8. Record Date
Section 9. Consent of Absentees
Section 10. Action Without Meeting
Section 11. Proxies
Section 12. Inspectors of Election
ARTICLE III Directors
Section 1. Powers
Section 2. Committees
Section 3. Number of Directors
Section 4. Election and Term of Office
Section 5. Vacancies
Section 6. Resignation
Section 7. Place of Meetings
Section 8. Annual Meetings
Section 9. Special Meetings
Section 10. Quorum
Section 11. Participation in Meetings by Conference Telephone
Section 12. Waiver of Notice
Section 13. Adjournment
Section 14. Fees and Compensation
Section 15. Action Without Meeting
ARTICLE IV Officers
Section 1. Officers
Section 2. Election
Section 3. Subordinate Officers
Section 4. Removal and Resignation
Section 5. Vacancies
Section 6. President
<PAGE>
Section 7. Vice Presidents
Section 8. Secretary
Section 9. Chief Financial Officer
Section 10. Chairman of the Board
ARTICLE V Other Provisions
Section 1. Inspection of Corporate Records
Section 2. Inspection of Bylaws
Section 3. Endorsement of Documents; Contracts
Section 4. Certificates of Stock
Section 5. Representation of Shares of Other Corporations
Section 6. Annual Report to Shareholders
Section 7. Construction and Definitions
Section 8. Compensation
Section 9. Indemnification of Agents of the
Corporation; Purchase of Liability Insurance
Section 10. Corporate Loans and Guarantees to Directors and Officers
ARTICLE VI Amendments
BYLAWS
FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
ARTICLES OF INCORPORATION,
OF
ZSTAR ENTERPRISES, INC.
(A NEVADA CORPORATION)
ARTICLE I. OFFICES.
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be fixed and located at such place as the Board of
Directors (herein referred to as the "Board") shall determine. The Board is
granted full power and authority to change said principal executive office
from one location to another.
SECTION 2. OTHER OFFICES. Branch or subordinate offices may be
established at any time by the Board at any place or places.
ARTICLE II. SHAREHOLDERS.
SECTION 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at the principal executive office of the Corporation unless another place
within or without the State of Nevada is designated by the Board.
SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on the fourth Friday in May of each year, at 10:00 A.M., local time,
or such other date or such other time as may be fixed by the Board, provided,
however, that should said day fall upon a Saturday, Sunday or legal holiday
observed by the Corporation at its principal executive office, then any such
annual meeting of shareholders shall be held
<PAGE>
at the same time and place on the next day thereafter ensuing which is a
business day. At such meetings, directors shall be elected and any other
proper business may be transacted.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Board, the Chairman of the Board, the President
or by the holders of shares entitled to cast not less than ten percent of the
votes at such meeting.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of
each annual or special meeting of shareholders shall be given not less than
10 nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat.
Such notice shall be given either personally or by first-class mail,
postage prepaid, or by other means of written communication, addressed to the
shareholder at the address of such shareholder appearing on the books of the
Corporation or given by the shareholder to the Corporation for the purpose of
notice, or if no such address appears or is given, at the place where the
principal executive office of the Corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. After notice is given by mail, the
Secretary or the Assistant Secretary, if any, or transfer agent, shall
execute an affidavit of mailing in accordance with this section.
The notice shall state the place, date and hour of the meeting and (i)
in the case of a special meeting, the general nature of the business to be
transacted, and no other business may be transacted, or (ii) in the case of
the annual meeting, those matters which the Board, at the time of the mailing
of the notice, intends to present for action by the shareholders, but,
subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. The notice of any meeting at which
directors are to be elected shall include the names of nominees intended at
the time of notice to be presented by the Board for election.
SECTION 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting
of the shareholders. Subject to the Articles of Incorporation of the
Corporation (herein referred to as the "Articles of Incorporation"), the
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the
shares required to constitute a quorum.
SECTION 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned from time
to time by the vote of a majority of the shares, the holders of which are
either present in person or represented by proxy thereat, but in the absence
of a quorum (except as provided in Section 5 of this Article) no other
business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat, other than
by announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days
or, if after adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting.
SECTION 7. VOTING. The shareholders entitled to notice of any meeting
or to vote at any such meeting shall be only those persons in whose names
shares are registered in the stock records of the Corporation on the record
date determined in accordance with Section 8 of this Article.
Except as provided below and except as may be otherwise provided in the
Articles of Incorporation, each outstanding share, regardless of class, shall
be entitled to one vote on each matter submitted to a vote of shareholders.
Subject to the requirements of the next sentence, every shareholder entitled
to vote at any
<PAGE>
election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares are
normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as the shareholder thinks fit. No
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate
a number of votes greater than the number of votes which such shareholder
normally is entitled to cast) unless such candidate or candidates' names have
been placed in nomination prior to the voting and any shareholder has given
notice at the meeting prior to the voting of such shareholder's intention to
cumulate the shareholder's votes.
Any holder of shares entitled to vote on any matter may vote part of the
shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office, but, if
the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.
Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins.
Provided that the quorum requirements of Section 5 above are satisfied:
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute at least a majority of the required quorum)
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by the Nevada General Corporation Law or the
Articles of Incorporation, provided that whenever under the Nevada General
Corporation Law shares are disqualified from voting on any matter, they shall
not be considered outstanding for purposes of the determination of a quorum
at any meeting to act upon, or the required vote to approve action upon any
matter; and in any election of directors, the candidates receiving the
highest number of affirmative votes of the shares entitled to be voted for
them, up to the number of directors to be elected by such shares, are
elected; votes against the director and votes withheld shall have no legal
effect.
SECTION 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of, or to vote
at, any meeting of the shareholders, or the shareholders entitled to receive
payment of any dividend or other distribution, or any allotment of rights, or
to exercise rights in respect of any other lawful action. The record date so
fixed shall be not more than 60 days nor less than 10 days prior to the date
of the meeting nor more than 60 days prior to any other action.
If no record date is fixed by the Board, (i) the record date for
determining shareholders entitled to notice of, or to vote at, a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held, and (ii) the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting,
when no prior action by the Board has been taken, shall be the day on which
the first written consent is given.
A determination of shareholders of record entitled to notice of, or to
vote at, a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting.
The Board shall fix a new record date if the meeting is adjourned for more
than 45 days from the date set for the original meeting.
SECTION 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting, or an approval of the minutes thereof. All such waivers, consents
or approvals
<PAGE>
shall be filed with the corporate records or made a part of the minutes of
the meeting. Neither the business to be transacted at nor the purpose of any
annual or special meeting of shareholders, need be specified in any written
waiver of notice, except as provided in the Nevada General Corporation Law.
SECTION 10. ACTION WITHOUT MEETING. Subject to the applicable section
of the Nevada General Corporation Law, any action which, under any provision
of the Nevada General Corporation Law, may be taken at any annual or special
meeting of shareholders, may be taken without a meeting and without prior
notice if a consent in writing, setting forth the action so taken, shall be
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.
SECTION 11. PROXIES. Every person entitled to vote shares shall have
the right to do so either in person or by one or more persons authorized by a
valid written proxy signed by such person or such person's attorney in fact
and filed with the Secretary. Subject to the provisions of this bylaw and
applicable law, any duly executed proxy continues in full force and effect
until revoked by the person executing it prior to the vote pursuant thereto.
SECTION 12. INSPECTORS OF ELECTION. Prior to any meeting of
shareholders, the Board may appoint inspectors of election to act at the
meeting or any adjournment thereof. If inspectors of election are not so
appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of the meeting may, and on the request of any shareholder or
his proxy shall, appoint inspectors of election or persons to replace those
who fail to appear or refuse to act at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the request of one
or more shareholders or proxies, the holders of a majority of shares or their
proxies present at the meeting shall determine whether one or three
inspectors are to be appointed. The inspectors of election shall (i)
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, (ii) receive votes, ballots or
consents, (iii) hear and determine all challenges and questions in any way
arising in connection with the right to vote, (iv) count and tabulate all
votes or consents, (v) determine when the poll shall close and the election
result and (vi) do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as it is
practicable. If there are three inspectors of election, the decision, act or
certificate of majority is effective in all respects as the decision, act or
certificate of all.
ARTICLE III. DIRECTORS.
SECTION 1. POWERS. Subject to limitations of the Articles of
Incorporation, these Bylaws and the Nevada General Corporation Law relating
to actions required to be approved by the shareholders or by the outstanding
shares, the business and affairs of the Corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board.
SECTION 2. COMMITTEES. The Board may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the
pleasure of the Board. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent member of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
such committee, to the extent provided in the resolution of the Board, shall
have all the authority of the Board, except with respect to (i) the approval
of any action required to be approved by the shareholders or by the
outstanding shares under the Nevada General Corporation Law, (ii) the filling
of vacancies on the Board or in any committee, (iii) the fixing of
compensation of the directors for serving on the Board or on any
<PAGE>
committee, (iv) the adoption, amendment or repeal of Bylaws, (v) the
amendment or repeal of any resolution of the Board which by its express terms
is not so amendable or repealable, (vi) a distribution to the shareholders,
except at a rate or in a periodic amount or within a price range determined
by the Board and (vii) the appointment of other committees of the Board or
the members thereof.
SECTION 3. NUMBER OF DIRECTORS. The authorized number of directors
shall be no less than two (2) nor more than nine (9) until changed by an
amendment of the Articles of Incorporation or this Section 3 duly approved by
the shareholders, subject to the Nevada General Corporation Law. However,
any reduction of the authorized number of directors does not remove any
director prior to the expiration of such director's term of office.
SECTION 4. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of the shareholders, but if any such annual meeting is
not held or the directors are not elected thereat, the directors may be
elected at any special meeting of shareholders held for that purpose.
Subject to Section 5 of this Article, each director shall hold office until
the next annual meeting and until a successor has been elected and qualified.
SECTION 5. VACANCIES. A vacancy or vacancies in the Board shall be
deemed to exist in case of the death, resignation or removal of any director,
if the authorized number of directors be increased or if the shareholders
fail at any annual or special meeting of shareholders at which any directors
are elected, to elect the full authorized number of directors to be voted at
that meeting.
Vacancies in the Board, except those existing as a result of a removal
of a director, may be filled by a majority of the remaining directors, or, if
the number of remaining directors is less than a quorum, by (i)_the unanimous
written consent of the remaining directors, (ii)_the affirmative vote of a
majority of the remaining directors at a meeting held pursuant to notice or
waivers of notice complying with the applicable section of the Nevada General
Corporation Law, or (iii)_by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
Vacancies in the Board created by the removal of a director may be
filled only by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required
quorum) or by the unanimous written consent of all shares entitled to vote
for the election of directors.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent other than to fill a vacancy created by removal requires the
consent of a majority of the outstanding shares entitled to vote.
SECTION 6. RESIGNATION. Any director may resign effective upon giving
written notice to the President, the Secretary or the Board, unless the
notice specifies a later time for the effectiveness of such resignation. If
the resignation is effective at a future time, a successor may be elected to
take office when the resignation becomes effective.
SECTION 7. PLACE OF MEETINGS. Regular or special meetings of the Board
shall be held at any place within or without the State of Nevada which has
been designated in the notice of the meeting or, if not stated therein, as
designated by resolution of the Board. In the absence of such designation,
meetings shall be held at the principal executive office of the Corporation.
SECTION 8. ANNUAL MEETINGS. Immediately following each annual meeting
of shareholders, the Board may, but shall not be required to, hold an annual
meeting at the same place, or at any other place that has been designated by
the Board, for the purpose of organization, election of officers or
transaction of other business as the Board may determine. Call and notice of
this meeting of the Board shall be in the manner
<PAGE>
for the conduct of special meetings as provided in Section 9 unless the Board
has determined by resolution to conduct a regular meeting at such time and
place, in which event call and notice of this meeting of the Board shall not
be required unless some place other than the place of the annual
shareholders' meeting has been designated.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the Board,
the President, the Secretary or by any two directors upon four days' notice
by mail or 48 hours' notice given personally or by telephone, telegraph,
telex or other similar means of communication. Any such notice shall be
addressed or delivered to each director at such director's address as it is
shown upon the records of the Corporation or as may have been given to the
Corporation by the director for purposes of notice.
SECTION 10. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board, unless a greater number be
required by law or by the Articles. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for such meeting.
SECTION 11. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the Board may participate in a meeting through use of conference telephone
or similar communications equipment, so long as all members participating in
such meeting can hear one another.
SECTION 12. WAIVER OF NOTICE. Notice of a meeting need not be given to
any director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting,
or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers,
consents or approvals shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 13. ADJOURNMENT. A majority of the directors present, whether
or not a quorum is present, may adjourn any directors' meeting to another
time and place. If a meeting is adjourned for more than 24 hours, notice of
any adjournment to another time or place shall be given prior to the time of
the adjourned meeting to the directors that were not present at the time of
adjournment.
SECTION 14. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board.
SECTION 15. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board. Such action by written consent shall have the same
effect as a unanimous vote of the members of the Board.
ARTICLE IV. OFFICERS.
SECTION 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation may
also have, at the discretion of the Board, a Chairman, one or more Vice
Presidents, one or more Assistant Secretaries, one or more Assistant
Financial Officers and such other officers as may be elected or appointed in
accordance with the provisions of Section 3 of this Article.
<PAGE>
SECTION 2. ELECTION. The officers of the Corporation, except such
officers as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen by, and shall serve
at the pleasure of, the Board, and shall hold their respective offices until
their resignation, removal or other disqualification from service, or until
their respective successors shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS. The Board may elect, and may empower
the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these Bylaws or as
the Board may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the Board at any time. Any officer may resign at
any time upon written notice to the Corporation without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is
a party.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these Bylaws for regular election or appointment to
such office.
SECTION 6. PRESIDENT. The President is the general manager and chief
executive officer of the Corporation and has, subject to the control of the
Board, general supervision, direction and control of the business and
officers of the Corporation. The President shall preside at all meetings of
the shareholders and at all meetings of the Board. The President has the
general powers and duties of management usually vested in the office of
president and general manager of a corporation and such other powers and
duties as may be prescribed by the Board.
SECTION 7. VICE PRESIDENTS. In the absence or disability of the
President, unless a Chairman has been elected, the Vice Presidents in order
of their rank as fixed by the Board or, if not ranked, the Vice President
designated by the Board, 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 upon the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed
for them respectively by the Board.
SECTION 8. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office and such other place as the Board may order, a
book of minutes of all meetings of shareholders and the Board, with the time
and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present or
represented at meetings of shareholders, and the proceedings thereof. The
Secretary shall keep, or cause to be kept, a copy of the Bylaws of the
Corporation at the principal executive office or business office in
accordance with the applicable section_of the Nevada General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share
register, showing the names of the shareholders and their addresses, the
number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board required by these Bylaws or by law to be
given, shall keep the seal of the Corporation in safe custody, and shall have
such other powers and perform such other duties as may be prescribed by the
Board.
SECTION 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
accounts of the properties and business transactions
<PAGE>
of the Corporation, and shall send or cause to be sent to the shareholders of
the Corporation such financial statements and reports as are by law or these
Bylaws required to be sent to them. The books of account shall at all times
be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other valuables
in the name and to the credit of the Corporation with such depositories as
may be designated by the Board. The Chief Financial Officer shall disburse
the funds of the Corporation as may be ordered by the Board, shall render to
the President and directors, upon their request, an account of all
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties
as may be prescribed by the Board.
SECTION 10. CHAIRMAN OF THE BOARD. If such an officer be elected, the
Chairman of the Board shall preside at meetings of the board of directors
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the board of directors or prescribed by the Bylaws.
In the absence of the President, or if there is no President, the Chairman of
the Board shall, in addition, be the chief executive officer of the
Corporation and shall have the powers and duties described in Section 6 above.
<PAGE>
ARTICLE V. OTHER PROVISIONS.
SECTION 1. INSPECTION OF CORPORATE RECORDS. The record of shareholders
shall be open to inspection and copying, and the accounting books and records
and minutes of proceedings of the shareholders and the Board and committees
of the Board, if any, shall be open to inspection, upon written demand on the
Corporation of any shareholder at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests as a
shareholder.
SECTION 2. INSPECTION OF BYLAWS. The Corporation shall keep at its
principal executive office in the State of Nevada, or if its principal
executive office is not in Nevada, at its principal business office in
Nevada, the original or a copy of these Bylaws as amended to date, which
shall be open to inspection by the shareholders at all reasonable times
during office hours. If the principal executive office of the Corporation is
outside Nevada and the Corporation has no principal business office in
Nevada, it shall upon the written request of any shareholder furnish to such
shareholder a copy of these Bylaws as amended to date.
SECTION 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, initial transaction statement or written
statement, conveyance or other instrument in writing and any assignment or
endorsement thereof executed or entered into between the Corporation and any
other person shall be valid and binding on the Corporation, when signed by
the Chairman, the President or any Vice President and the Secretary, any
Assistant Secretary, the Chief Financial Officer or any Assistant Financial
Officer of the Corporation unless the other party knew that the signing
officers had no authority to execute the same. Any such instruments may be
signed by any other person or persons and in such manner as from time to time
shall be determined by the Board, and, unless so authorized by the Board, no
officer, agent or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or amount.
SECTION 4. CERTIFICATES OF STOCK. Every holder of shares of the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the President or a Vice President and by the Chief Financial
Officer or an Assistant Financial Officer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the shareholder. Any or all of the signatures on the certificate
may be facsimile.
Except as provided in this Section, no new certificate for shares shall
be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the Corporation may
require that the Corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including expense or liability) on account of the alleged loss, theft or
destruction of such certificate or the issuance of such new certificate.
SECTION 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or by the
President are each authorized to vote, represent and exercise on behalf of
the Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the Corporation. The
authority herein granted may be exercised either by any such officer in
person or by any other person authorized so to do by proxy or power of
attorney duly executed by said officer.
SECTION 6. ANNUAL REPORT TO SHAREHOLDERS. The requirement of sending
an annual report to shareholders which is set forth in the Nevada General
Corporation Law is expressly waived, but nothing herein shall be interpreted
as prohibiting the Board from issuing annual or other periodic reports to
shareholders.
<PAGE>
Notwithstanding the immediately preceding paragraph, if the Corporation
has 100 or more holders of record of its shares (determined as provided in
the Nevada General Corporation Law), the Board shall cause an annual report
to be sent to the shareholders not later than 120 days after the close of the
fiscal year. Such report, in addition to such information as may be required
by the Nevada General Corporation Law, shall contain a balance sheet as of
the end of that fiscal year and an income statement and statement of changes
in financial position for that fiscal year, accompanied by any report thereon
of independent accountants or, if there is no such report, the certificate of
an authorized officer of the Corporation that the statements were prepared
without audit from the books and records of the Corporation. The requirement
of sending such report to the shareholders at least 15 (or, if sent by
thirdclass mail, 35) days prior to the annual meeting of shareholders to be
held during the next fiscal year is expressly waived.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the General Provisions of the Nevada Corporations Code and in
the Nevada General Corporation Law shall govern the construction of these
Bylaws.
SECTION 8. COMPENSATION. The salaries of all officers and agents of
the Corporation shall be fixed by the Board.
SECTION 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION; PURCHASE OF
LIABILITY INSURANCE. For purposes of this Section 9, "agent" means any
person who is or was a director, officer, employee or other agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a foreign or domestic corporation
which was a predecessor corporation of the Corporation or of another
enterprise at the request of such predecessor corporation; "proceeding" means
any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" includes without
limitation, attorneys' fees and any expenses of establishing a right to
indemnification under this Section 9.
The Corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Corporation to procure a judgment in its
favor) by reason of the fact that such person is or was an agent of the
Corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding
to the fullest extent permitted under the General Corporation Law of the
State of Nevada, as amended from time to time.
SECTION 10. CORPORATE LOANS AND GUARANTEES TO DIRECTORS AND OFFICERS.
The Corporation shall not make any loan of money or property to, or guarantee
the obligation of, any director or officer of the Corporation or of its
parent, if any, unless the transaction, or an employee benefit plan
authorizing the loans or guarantees after disclosure of the right under such
a plan to include officers or directors, is approved by a majority of the
shareholders entitled to act thereon.
The Corporation shall not make any loan of money or property to, or
guarantee the obligation of, any person upon the security of shares of the
Corporation or of its parent, if any, if the Corporation's recourse in the
event of default is limited to the security for the loan or guaranty, unless
the loan or guaranty is adequately secured without considering these shares,
or the loan or guaranty is approved by a majority of the shareholders
entitled to act thereon.
Notwithstanding the first paragraph of this Section 10, the Corporation
may advance money to a director or officer of the Corporation or of its
parent, if any, for any expenses reasonably anticipated to be incurred in the
performance of the duties of the director or officer, provided that in the
absence of the advance
<PAGE>
the director or officer would be entitled to be reimbursed for the expenses
by the Corporation, its parent, or subsidiary, if any.
The provisions of the first paragraph of this Section 10 do not apply to
the payment of premiums in whole or in part by the Corporation on a life
insurance policy on the life of a director or officer so long as repayment to
the Corporation of the amount paid by it is secured by the proceeds of the
policy and its cash surrender value.
The provisions of this Section 10 do not apply to any transaction, plan
or agreement permitted under the applicable section of the Nevada General
Corporation Law relating to employee stock purchase plans.
For the purposes of this Section, "approval by a majority of the
shareholders entitled to act" means either (1) written consent of a majority
of the outstanding shares without counting as outstanding or as consenting
any shares owned by any officer or director eligible to participate in the
plan or transaction that is subject to this approval, (2) the affirmative
vote of a majority of the shares present and voting at a duly held meeting at
which a quorum is otherwise present, without counting for purposes of the
vote as either present or voting any shares owned by any officer or director
eligible to participate in the plan or transaction that is subject to the
approval, or (3) the unanimous vote or written consent of the shareholders.
If the Corporation has more than one class or series of shares outstanding,
the "shareholders entitled to act" within the meaning of this Section
includes only holders of those classes or series entitled under the articles
to vote on all matters before the shareholders or to vote on the subject
matter of this Section, and includes a requirement for separate class or
series voting, or for more or less than one vote per share, only to the
extent required by the Articles.
ARTICLE VI. AMENDMENTS.
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however, that
after the issuance of shares, a Bylaw specifying or changing a fixed number
of directors or the maximum or minimum number or changing from a fixed to a
variable number of directors or vice versa may be adopted only by approval of
the outstanding shares.
CERTIFICATE OF SECRETARY
OF
ZSTAR ENTERPRISES, INC.
(A NEVADA CORPORATION)
I hereby certify that I am the duly elected and acting Secretary of
ZSTAR ENTERPRISES, INC., a Nevada corporation (the "Corporation"), and that
the foregoing Bylaws constitute the Bylaws of the Corporation as duly adopted
by the Board of Directors thereof by action taken without a meeting.
DATED: June 17, 1998
/s/ Roberto Chu
-----------------------------
Roberto Chu, Secretary
<PAGE>
EXHIBIT 4.1
FORM OF STOCK CERTIFICATE
ZSTAR ENTERPRISES, INC.
AUTHORIZED COMMON STOCK: 30,000,000 SHARES - PAR VALUE: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of ZSTAR ENTERPRISES, INC. Common Stock transferable on the books of the
Corporation in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: ___________________
Secretary President
<PAGE>
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ............... Custodian ...............
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ..........................................
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For Value Received, __________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
--------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________Shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________Attorney to transfer the said
stock on the books of the within named Corporation with full power of
substitution in the premises.
Dated
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER
<PAGE>
EXHIBIT 4.2
FORM OF SUBSCRIPTION AGREEMENT
ZSTAR ENTERPRISES, INC.
SUBSCRIPTION AGREEMENT
THE OFFER AND SALE OF THE SHARES OF COMMON STOCK REFERRED TO IN THIS
SUBSCRIPTION AGREEMENT (THE "OFFERING") HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM
THE SECURITIES REGISTRATION AND QUALIFICATION REQUIREMENTS OF THE ACT AND SUCH
LAWS. ACCORDINGLY, THE SHARES OF COMMON STOCK MAY NOT BE TRANSFERRED OR RESOLD
WITHOUT REGISTRATION AND QUALIFICATION UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, UNLESS AN EXEMPTION FROM SUCH REGISTRATION AND QUALIFICATION
UNDER THE ACT AND SUCH LAWS IS THEN AVAILABLE. THE SHARES OF COMMON STOCK HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE
ADEQUACY OF THE INFORMATION SET FORTH IN THE OFFERING CIRCULAR DATED __________
WHICH RELATES TO THIS OFFERING.
I. SUBSCRIPTION.
A. THE SECURITIES. This Subscription Agreement relates to shares of the
Common Stock, par value U.S.$0.001 (the "Shares"), of Zstar Enterprises, Inc., a
Nevada corporation (the "Company"), which the Company is offering to sell, at
U.S.$_______ per Share, up to an aggregate maximum of _________ of such Shares
(the "Offering").
B. SUBSCRIPTION AND METHOD OF PAYMENT. The undersigned subscriber (the
"Subscriber") hereby subscribes, on the terms and conditions set forth in this
Subscription Agreement, to purchase Shares (the "Subscribed
Shares") at an aggregate purchase price (the number of Subscribed Shares times
U.S.$______) of U.S. $ (the "Purchase Price"). The Subscriber
acknowledges that by executing this Subscription Agreement he is making an
irrevocable offer to purchase the Subscribed Shares from the Company against
payment by him of the Purchase Price. This subscription may be rejected by the
Company in its sole discretion. The Subscriber hereby agrees, on the day upon
which he receives notification from the Company that this Subscription Agreement
has been unconditionally accepted by the Company, to deliver to the Company cash
or a personal or company check backed by immediately available funds in the
amount of the Purchase Price. Upon the receipt by the Company of the amount of
the Purchase Price in the specified manner, the Company shall deliver to the
Subscriber a share certificate(s) of the Company in the name of the Subscriber
evidencing the Subscribed Shares and the Subscriber's ownership thereof.
II. ACKNOWLEDGMENTS OF THE SUBSCRIBER
THE SUBSCRIBER ACKNOWLEDGES TO THE COMPANY THAT:
HE/SHE HAS RECEIVED A COPY OF THE OFFERING CIRCULAR DATED ____________
(THE "OFFERING CIRCULAR"), SETTING FORTH INFORMATION PERTINENT TO A PURCHASE OF
THE SUBSCRIBED SHARES (THE
<PAGE>
"INVESTMENT"). THE SUBSCRIBER HAS CAREFULLY READ THE
OFFERING CIRCULAR. THE COMPANY HAS MADE AVAILABLE TO HIM AND/OR HIS ADVISORS
THE OPPORTUNITY TO OBTAIN ADDITIONAL WRITTEN INFORMATION, IF ANY, REQUESTED BY
HIM AND/OR HIS ADVISORS TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED IN
THE OFFERING CIRCULAR OR TO EVALUATE THE MERITS AND RISKS OF THE INVESTMENT. IN
REACHING THE CONCLUSION THAT HE DESIRES TO ACQUIRE THE SUBSCRIBED SHARES, THE
SUBSCRIBER HAS CAREFULLY EVALUATED HIS FINANCIAL RESOURCES AND INVESTMENT
POSITION, AS WELL AS THE RISKS ASSOCIATED WITH THE INVESTMENT, INCLUDING,
WITHOUT LIMITATION, THOSE DELINEATED IN THE RESPONSE TO QUESTION 2 OF THE
OFFERING CIRCULAR. THE SUBSCRIBER HAS NOT RELIED ON ANY ORAL REPRESENTATIONS OR
ORAL INFORMATION FURNISHED TO THE SUBSCRIBER OR HIS ADVISORS BY THE COMPANY OR
ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS, AGENTS
OR REPRESENTATIVES (COLLECTIVELY, THE "COMPANY REPRESENTATIVES"), IN CONNECTION
WITH THE OFFERING. THE SUBSCRIBER HAS RELIED IN DETERMINING TO MAKE THE
INVESTMENT SOLELY ON THE INFORMATION CONTAINED IN THE OFFERING CIRCULAR AND
INFORMATION OTHERWISE PROVIDED TO THE SUBSCRIBER IN WRITING BY OFFICERS AND
DIRECTORS OF THE COMPANY. EXCEPT FOR THE INFORMATION CONTAINED IN THE OFFERING
CIRCULAR AND ANY WRITTEN INFORMATION REQUESTED BY AND FURNISHED TO THE
SUBSCRIBER OR THE SUBSCRIBER'S ADVISORS, AS DESCRIBED IN THIS SUBPARAGRAPH (A),
NEITHER THE SUBSCRIBER NOR ANY OF HIS ADVISORS HAS BEEN FURNISHED BY THE COMPANY
OR ANY COMPANY REPRESENTATIVE WITH ANY OTHER WRITTEN MATERIAL OR LITERATURE
RELATING TO THE OFFERING OR THE INVESTMENT. NEITHER THE COMPANY NOR ANY OF THE
COMPANY REPRESENTATIVES, NOR ANYONE PURPORTING TO ACT ON THEIR BEHALF, HAS MADE
ANY ORAL REPRESENTATION TO THE SUBSCRIBER WITH RESPECT TO ANY TAX, FINANCIAL OR
ECONOMIC BENEFITS TO BE DERIVED FROM THE INVESTMENT. THE SUBSCRIBER IS RELYING
SOLELY UPON THE SUBSCRIBER'S OWN KNOWLEDGE AND UPON THE ADVICE OF HIS PERSONAL
ADVISORS WITH RESPECT TO THE TAX, FINANCIAL, ECONOMIC AND OTHER PERTINENT
ASPECTS OF THE INVESTMENT.
The subscriber has carefully reviewed and analyzed the risks of, and other
pertinent considerations relating to, the Investment, based solely on the
information contained in the Offering Circular and the other written information
referenced in subparagraph (a) above.
THE COMPANY WAS INCORPORATED ON _________, AND HAS NO OPERATING HISTORY;
FOR THIS AND OTHER REASONS, THE INVESTMENT INVOLVES SIGNIFICANT FINANCIAL RISKS,
INCLUDING THE RISK OF LOSS TO THE SUBSCRIBER OF THE ENTIRE PURCHASE PRICE.
The Subscriber is aware that (i) the Company's founding shareholders
purchased ________ Shares at U.S.$0.001 per share for a total consideration of
u.s.$_____; and (ii) pursuant to an Offering Circular dated ________, the
Company sold _________ Shares at a price of U.S.$_____ per share for a total
consideration of U.S.$_______. These recent share issues have the effect of
substantially diluting the Subscriber's equity interest in the Company.
THE SUBSCRIBER IS NOT TO CONSTRUE THE PROVISION OF THE OFFERING CIRCULAR OR
THE FURNISHING OF THE OTHER WRITTEN INFORMATION REFERENCED IN SUBPARAGRAPH (a)
ABOVE TO THE SUBSCRIBER AS CONSTITUTING LEGAL, TAX OR INVESTMENT ADVICE, AND THE
SUBSCRIBER SHOULD CONSULT THE SUBSCRIBER'S OWN LEGAL COUNSEL, ACCOUNTANT AND/OR
OTHER PROFESSIONAL ADVISORS AS TO LEGAL, TAX AND RELATED MATTERS CONCERNING THE
INVESTMENT.
No assurance can be made that the Company will commence operations, or if
it does commence operations, that it will ever operate at a profit or, if it
does operate at a profit, that dividends will be declared and paid on the
Subscribed Shares.
THE SUBSCRIBER MAY NOT BE ABLE TO SELL OR DISPOSE OF THE SUBSCRIBED SHARES,
AS THERE IS NO, AND MAY NEVER BE ANY, PUBLIC MARKET FOR SUCH SECURITIES. THE
SUBSCRIBER'S COMMITMENT TO INVESTMENTS WHICH ARE NOT READILY MARKETABLE IS NOT
DISPROPORTIONATE TO THE SUBSCRIBER'S NET WORTH AND MAKING THE INVESTMENT WILL
NOT CAUSE THE SUBSCRIBER'S OVERALL COMMITMENT THERETO TO BECOME EXCESSIVE.
The Subscriber is aware that the offer and sale to him of the Subscribed
Shares have not been registered under the Securities Act of 1933, as amended
(the "act"), or registered or qualified under applicable state securities or
"Blue Sky" laws, and, therefore, the Subscribed Shares cannot be reoffered and
resold unless either the reoffer and resale thereof are subsequently registered
and qualified under the Act and said Blue Sky laws or an exemption from such
registration and qualification is available; the Company has no intention of
registering or qualifying under the Act or any such Blue Sky laws the
Subscriber's
<PAGE>
reoffer and resale of any of the Subscribed Shares and no exemption
from registration or qualification may be available under the Act or such Blue
Sky laws to the Subscriber at the time he wishes to dispose of such Shares.
NO FEDERAL OR STATE AGENCY HAS PASSED UPON THE SUBSCRIBED SHARES, MADE ANY
FINDING OR DETERMINATION AS TO THE FAIRNESS OF THE INVESTMENT, OR PASSED ON THE
ADEQUACY OF THE INFORMATION SET FORTH IN THE OFFERING CIRCULAR.
Neither the Company nor any Company Representative offered to sell the
Subscriber any Shares by means of any form of general advertising or general
solicitation, such as media advertising or seminars.
III. CERTIFICATION OF SUBSCRIBER STATUS.
If the Subscriber is a "U.S. person", the Subscriber hereby certifies to the
Company that the Subscriber is, as reflected by checking the appropriate box (or
boxes) below and initialing in the margin directly across from such checked box
(or boxes):
i. [ ] ________ (INITIAL) a natural person whose individual net worth,
or joint net worth with that person's spouse (including the value of his or her
principal residence valued at either (A) cost, including cost of improvements,
net of current encumbrances on the property, or (B) the appraised value of the
property as determined by a written appraisal used by an institutional lender
making a loan to him or her secured by the property, including subsequent
improvements, net of current encumbrances on the property), at the time of his
or her purchase of the Subscribed Shares exceeds U.S. $1,000,000; or
ii. [ ] ________ (INITIAL) a natural person who had individual annual
income in excess of U.S. $200,000 in each of 1996 and 1997 and who reasonably
expects that his or her individual annual income will exceed U.S. $200,000 in
1998; or
iii. [ ] ________ (INITIAL) a natural person who had joint annual
income with that person's spouse in excess of $300,000 in each of 1996 and 1997
and who reasonably expects to have joint annual income in excess of U.S.
$300,000 in 1998; or
iv. [ ] ________ (INITIAL)
a. [ ] ________ (INITIAL) a bank as defined in Section 3(a)(2) of the
Act or a savings and loan association or other institution as defined in
Section 3(a)(5)(A) of the Act, whether acting in its individual or
fiduciary capacity;
b. [ ] ________ (INITIAL) a broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934, as amended;
c. [ ] ________ (INITIAL) an insurance company as defined in Section
2(13) of the Act;
d. [ ] _______ (INITIAL) an investment company registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act");
e. [ ] ________ (INITIAL) a business development company as defined in
Section 2(a) (48) of the Investment Company Act;
f. [ ] __________ (INITIAL) a Small Business Investment Company
licensed by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958;
g. [ ] __________ (INITIAL) a plan established and maintained by a
state, its political subdivisions, or any agency or instrumentality of a
state or its political subdivisions, for the benefit of its employees, if
the plan has total assets in excess of U.S. $5,000,000;
h. [ ] _______ (INITIAL) an employee benefit plan within the meaning
of the Employee Retirement Income Security Act of 1974, if the investment
decision is made by a plan fiduciary, as defined in Section 3(21) of such
act, that is a bank, a savings and loan association, an insurance company
or a registered investment adviser, or if the employee benefit plan has
total assets in excess of U.S. $5,000,000, or, if a self-directed plan,
with investment decisions made solely by persons that meet any one or more
of the tests set forth in Section III. (i) through (v) hereof;
i. [ ] ________ (INITIAL) a private business development company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as
amended;
<PAGE>
j. [ ] ________ (INITIAL) an organization described in Section 501(c)(3)
of the Internal Revenue Code, a corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific purpose of
making the Investment, with total assets in excess of U.S. $5,000,000
k. [ ] ________ (INITIAL) a trust, with total assets in excess of U.S.
$5,000,000, not formed for the specific purpose of making the Investment,
whose purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D promulgated under the Act; or
i. [ ] ________ (INITIAL) an entity in which all of the equity owners meet
any one or more of the tests set forth in Section III.(i) through (iv); or
ii. [ ] ________ (INITIAL) none of the above.
IV. REPRESENTATIONS AND WARRANTIES OF NATURAL PERSON SUBSCRIBER.
The Subscriber, if a natural person, represents and warrants to the Company
that:
THE SUBSCRIBER IS 21 YEARS OF AGE OR OLDER, HAS ADEQUATE MEANS OF
PROVIDING FOR HIS OR HER CURRENT NEEDS AND PERSONAL CONTINGENCIES AND HAS NO
NEED FOR LIQUIDITY IN THE INVESTMENT.
The Subscriber is able to bear the economic risks attendant on the
Investment.
THE SUBSCRIBER IS A BONA FIDE RESIDENT AND DOMICILIARY (NOT A TEMPORARY OR
TRANSIENT RESIDENT) OF THE STATE OR COUNTRY SET FORTH BELOW HIS SIGNATURE ON THE
SIGNATURE PAGE HEREOF.
The Subscriber understands, or has relied upon the advice of his or her own
personal tax and legal counsel, accountants, and/or other professional advisors
with regard to, the financial, tax and other pertinent considerations in making
the Investment.
THE SUBSCRIBER IS ACQUIRING THE SUBSCRIBED SHARES FOR THE SUBSCRIBER'S OWN
ACCOUNT, AS PRINCIPAL, FOR INVESTMENT AND NOT WITH A VIEW TO THE RESALE OR
DISTRIBUTION OF ANY INTEREST THEREIN.
[ ] ________ (INITIAL) the total purchase price of securities at time of
sale of the securities will not exceed 10% of subscriber's net worth
(Individuals: either independently or jointly with your spouse).
V. REPRESENTATIONS AND WARRANTIES OF ENTITY SUBSCRIBER.
The Subscriber, if a corporation, partnership or other entity, represents and
warrants to the Company that:
IT IS DULY FORMED AND IS VALIDLY EXISTING IN GOOD STANDING UNDER THE
LAWS OF THE JURISDICTION OF ITS FORMATION, WITH FULL POWER AND AUTHORITY TO
ENTER INTO THE TRANSACTIONS CONTEMPLATED BY THIS SUBSCRIPTION AGREEMENT.
It has not been formed for the purpose of making the Investment.
ITS REPRESENTATIVE WHO, ON ITS BEHALF, HAS CONSIDERED THE MAKING OF THE
INVESTMENT (THE "AUTHORIZED REPRESENTATIVE"), IS THE PERSON WHO EXECUTED THIS
SUBSCRIPTION AGREEMENT ON ITS BEHALF, AND THE AUTHORIZED REPRESENTATIVE WAS
DULY AUTHORIZED TO ACT FOR IT IN REVIEWING THE INVESTMENT.
This Subscription Agreement has been duly and validly authorized,
executed and delivered by the Subscriber, and when executed and delivered by
the other parties hereto, will constitute the valid, binding and enforceable
obligation of the Subscriber.
THE SUBSCRIBER IS ACQUIRING THE SUBSCRIBED SHARES FOR ITS OWN ACCOUNT, AS
PRINCIPAL, FOR INVESTMENT AND NOT WITH A VIEW TO THE RESALE OR DISTRIBUTION OF
ANY INTEREST THEREIN.
VI. CORRECTNESS AND COMPLETENESS OF INFORMATION RELATING TO SUBSCRIBER;
ACKNOWLEDGMENT RE SECURITIES LAW MATTERS.
All the information which the Subscriber has heretofore furnished to the
Company, or which is set forth herein or in any document delivered by the
Subscriber pursuant hereto or in connection herewith, with respect to the
Subscriber's status, financial condition and knowledge and experience is
correct and complete as of the date hereof, and if there should be any
material change in such information prior to the sale of the Subscribed
<PAGE>
Shares to the Subscriber, the Subscriber will immediately furnish such
revised or corrected information to the Company. In furnishing the
information, representations and warranties set forth herein, the Subscriber
acknowledges that the Company will be relying thereon in determining, INTER
ALIA, whether the offer and sale of the Subscribed Shares to the Subscriber
is exempt from the requirement to register or qualify said offer and sale
under applicable state securities or "Blue Sky" laws.
<PAGE>
VII. COVENANT OF SUBSCRIBER TO COMPLY WITH BLUE SKY LAWS.
The Subscriber agrees that if the Subscriber is a resident of any state whose
"Blue Sky" laws or other local securities laws require a restriction on
transferability of any of the securities referred to in this Subscription
Agreement, the Subscriber will specifically and fully comply with such
restrictions.
VIII. INDEMNIFICATION.
The Subscriber hereby agrees to indemnify, defend and hold harmless the
Company and its subsidiaries, and any and all of the employees, directors,
officers, attorneys, accountants, agents, affiliates or control persons of
any such entity, who were or are a party or are threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, from and against any and
all damage, loss, cost, expense (including judgments, fines and amounts paid
in settlement), obligation, claim, cause of action or liability (including
attorneys' fees, expert witness fees, investigative fees, accountants' fees,
and the costs incurred by such individuals, concerns or entities) any of them
may incur by reason of any breach by the Subscriber of the representations,
warranties, covenants and agreements made by the Subscriber in this
Subscription Agreement or any false statement contained in any document
delivered by the Subscriber pursuant hereto or in connection herewith.
IX. OBLIGATIONS OF SUBSCRIBER.
The Subscriber hereby acknowledges and agrees that the subscription hereunder
is irrevocable, that the Subscriber is not entitled to cancel, terminate or
revoke this Subscription Agreement or any agreements of the Subscriber
hereunder and that this Subscription Agreement and such other agreements
shall survive the death or disability of the Subscriber and shall be binding
upon and inure to the benefit of the parties and their respective heirs,
executors, administrators, successors, legal representatives and permitted
assigns. If the Subscriber is more than one person, the obligations of such
persons hereunder shall be joint and several and the representations,
warranties, covenants, agreements and acknowledgments of the Subscriber
herein contained shall be deemed to be made by and be binding upon each such
person and his or her respective heirs, executors, administrators,
successors, legal representatives and permitted assigns.
X. GOVERNING LAW.
This Subscription Agreement shall be governed by and
interpreted and enforced in accordance with the internal substantive laws of
the State of Nevada without regard to choice of law or conflicts of law
principles.
XI. COUNTERPARTS.
This Subscription Agreement may be executed through the
use of separate signature pages or in any number of counterparts, and each of
such counterparts shall, for all purposes, constitute one agreement binding
on all parties, notwithstanding that all parties are not signatories to the
same physical counterpart.
XII. ENTIRE AGREEMENT.
This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there
are no representations, warranties, covenants or other agreements or
understandings between such parties except as stated or referred to herein.
<PAGE>
XIII. SEVERABILITY.
Any provision of this Subscription Agreement which is invalid or unenforceable
in any jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
XIV. BACK-UP WITHHOLDING.
The Subscriber verifies under penalty of perjury that the Taxpayer
Identification Number or Social Security Number shown on the signature page of
this Subscription Agreement is true, correct and complete and that the
Subscriber is not subject to backup withholding either (a) because the
Subscriber has not been notified that it is subject to backup withholding as a
result of a failure to report all interest or dividends or (b) because the U.S.
Internal Revenue Service has notified the Subscriber that the Subscriber is no
longer subject to backup withholding.
XV. ASSIGNABILITY.
This Subscription Agreement shall not be assignable by the Subscriber without
the prior written consent of the Company.
XVI. GENDER, NUMBER AND HEADINGS.
As used in this Subscription Agreement, the masculine gender will include the
feminine and neuter, and vice versa, as the context so requires; and the
singular number will include the plural, and vice versa, as the context so
requires. As used in this Subscription Agreement, section and subsection
headings are for convenience of reference only and shall not be used to modify,
interpret, limit, expand or construe the terms of this Subscription Agreement.
THERE IS NO ESTABLISHED MARKET FOR THESE SECURITIES AND THERE MAY NOT BE ANY
MARKET FOR THESE SECURITIES IN THE FUTURE. THE SUBSCRIPTION PRICE OF THESE
SECURITIES HAS BEEN ARBITRARILY DETERMINED BY THE COMPANY AND IS NOT AN
INDICATION OF THE ACTUAL VALUE OF THESE SECURITIES.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement this
____ day of _________________, _____.
INDIVIDUAL SUBSCRIBER(S)
_____ Individual Ownership
_____ Joint Tenants with Right of survivorship (both Tenants must sign)
_____ Husband and Wife as Community Property (both Spouses must sign)
_____ Tenants-in-Common (all Tenants must sign)
<PAGE>
_____ A Married (Man) (Woman) as (His) (Her) Separate Property
ENTITY SUBSCRIBER
_____ Corporation (Please affix corporate seal on signature page)
_____ Partnership
_____ Trust: Name of Trustee: ____________________________________
Name of Trust: ____________________________________
Date of Trust Instrument: ____________________________
_______ Other (Explain):________________________________
State of Formation of Entity: _____________________________
A. Number of Subscribed Shares for which Subscriber is subscribing:
A. Purchase Price (the number filled in A.
multiplied by U.S.$___): U.S. $
FOR INDIVIDUAL SUBSCRIBER(S)
___________________________ ___________________________
Signature Name(s) Typed or Printed
___________________________ ___________________________
Social Security No/Government ID Resident Address
___________________________ ___________________________
Mailing Address, if different City, State and Zip Code
___________________________ ___________________________
<PAGE>
Mailing Address, if different Country
FOR ENTITY SUBSCRIBER
___________________________ ___________________________
Signature Of Capacity Signature of Capacity
___________________________ ____________________________
Name(s) Typed or Printed Name(s) Typed or Printed
__________________________ ____________________________
Tax Identification No Social Security No.
__________________________ ____________________________
Address City, State and Zip Code
__________________________ ___________________________
Mailing Address, if different City, State and Zip Code
ACCEPTED AS OF THIS ___________DAY OF _______________, _____:
ZSTAR ENTERPRISES, INC., a Nevada corporation
By: ______________________ Its: PRESIDENT
____________________
<PAGE>
EXHIBIT 10
MANAGEMENT AGREEMENT
THIS AGREEMENT made effective June 20, 1998.
BETWEEN:
ZSTAR ENTERPRISES, INC.. a body corporate, duly
incorporated under the business corporation act of
the State of Nevada, having its head office
situated at 4323 West 12th Avenue, Vancouver,
B.C., Canada
(hereinafter called the "Corporation")
OF THE FIRST PART
AND:
JOIST MANAGEMENT LTD. a body corporate, having its
head office situated at 1304 Pik Hoi House, Choi
Hung Estate, Kowloon, Hong Kong
(hereinafter called the "Manager")
OF THE SECOND PART
WHEREAS:
A. The Corporation requires the services of an administrator/manager to
fulfill the day-to-day responsibilities imposed on the Corporation; and
B. The Manager has agreed to act as administrator/manager of the
Corporation;
NOW THEREFORE THIS AGREEMENT WITNESSETH that for and in consideration of the
premises, the mutual covenants and agreements herein contained the parties
hereto hereby agree as follows:
1. The Corporation hereby agrees to retain the services of the Manager.
2. The retention of the Manager shall be for a period of one (1) year
commencing June 1, 1998, and continuing thereafter from year to year unless
and until terminated as hereinafter provided.
3. The Manager shall serve the Corporation and any subsidiaries from time
to time owned by the Corporation in such capacity or capacities and shall
perform such duties and exercise such powers as may from time to time be
determined by Resolution of the Board of Directors of Corporation.
4. Notwithstanding the control vested in the Board of Directors with respect
to the activities of the Manager, the Manager shall have from the date of
commencement of this Agreement, the authority and responsibility to deal with
the following subject matters:
<PAGE>
a. maintaining the services of professionals for the purpose of reviewing all
prospects introduced to the Corporation for investment or participation;
b. selecting on the basis of evaluations provided by professionals after
consideration of the risk factors involved, suitable properties for
acquisition and participation;
c. negotiating for and obtaining the services of operators for the
Corporation's prospects, or if the Corporation is the operator,
negotiating for and obtaining the services of professionals;
d. conducting on-site inspections of all projects undertaken by the
Corporation;
e. arranging for and securing financing for the Corporation as may be
permitted by regulatory bodies;
f. arranging for timely disclosure of all material facts in the affairs of
the Corporation;
g. arranging for the collection of all receivables and revenue to be obtained
by the Corporation;
h. establishing and maintaining suitable banking relations;
I. ENSURING THE MAINTENANCE OF PROPER ACCOUNTING RECORDS AND COMPILING
MONTHLY STATEMENTS OF THE SOURCE AND APPLICATION OF FUNDS;
j. arranging for payment of all payables of the Corporation and/or any
subsidiaries;
k. perusing and replying to all corporate inquiries and correspondence;
l. securing and obtaining for the benefit of the Corporation competent tax
advice, legal advice and services and accounting services; and
m. all such other duties as may be imposed upon the Manager from time to time
due to the nature of the Corporation's business.
5. The remuneration of the Manager for its services hereunder shall be at
the rate of USD$10,000.00 per month (together with any such increments
thereto as the Board of Directors of the Corporation may from time to time)
inclusive of all administrative, office, traveling and out-of-pocket expenses
actually and properly incurred by it in connection with its duties hereunder.
6. Any notice required or permitted to be given hereunder to the Manager or
to the Corporation shall be given by registered mail, postage prepaid,
addressed to the Manager or the Corporation at their respective registered
offices from time to time in existence. Any notice mailed as aforesaid
shall be deemed to have been received by the Addressee on the second business
day following the date of mailing.
7. This Agreement may be terminated:
a. by the Manager on five (5) days written notice to the Corporation; or
b. by the Corporation on five (5) days written notice to the Manager.
8. The provisions of this Agreement shall be governed by and interpreted in
accordance with the laws of Hong Kong.
IN WITNESS WHEREOF, the parties hereto have hereto caused these presents to be
executed, as of the day and year first above written.
S/ Fred Tham s/ Chui Keung Ho
- ----------------------------- -----------------------------
Joist Management Ltd. Zstar Enterprises, Inc.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-17-1998
<PERIOD-END> OCT-23-1998
<CASH> 185,125
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 187,705
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 189,705
<CURRENT-LIABILITIES> 12,000
<BONDS> 0
0
0
<COMMON> 233,500
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 189,705
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 55,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (55,795)
<EPS-PRIMARY> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
<PAGE>
EXHIBIT 99
LETTER OF INTENT
Sept. 2, 1998
Mr. David Ho
President
Apex Canadian Holidays Ltd.
946 West 7th Avenue
Vancouver, B.C.
CANADA, V5Z 1C3
RE: LETTER OF INTENT
Dear Mr. Ho:
This letter sets forth our preliminary understanding concerning the purchase by
Zstar Enterprises, Inc., a Nevada corporation ("Zstar"), of the equity interest
in Apex Canadian Holidays Ltd., a Canadian company ("Apex") (such transaction,
the "Stock Purchase").
The Stock Purchase shall take place on the following general terms:
() Zstar shall acquire, and Apex shall sell, 100% of all the outstanding
and issued equity shares of Apex, for a cash payment of Fifty Thousand
Dollars (US$50,000).
(2) In connection with the Stock Purchase contemplated hereby, Zstar shall
use its commercially reasonable efforts to raise Five Hundred Thousand
Dollars (US$500,000) through a private placement as defined under the
Securities Act of 1933 (the "Private Placement"). The successful completion
of the Private Placement is condition precedent to the consummation of the
Stock Purchase.
(3) Zstar and Apex shall negotiate in good faith with a view to entering
into a definitive stock purchase agreement (the "STOCK PURCHASE AGREEMENT")
providing for the Stock Purchase, which Stock Purchase Agreement shall
contain, among other things and in addition to the other terms of this Letter
of Intent (see Section 8), the following provisions:
(i) Zstar represents and warrants to Apex that (both as of the date of
the Stock Purchase Agreement and of the closing of the Stock
Purchase (the "Closing") unless otherwise specified herein):
(ii) Zstar is a corporation duly organized, existing and in good
standing, under the laws of the State of Nevada.
(iii) As of the Closing, the authorized capital stock of Zstar will
consist of 30,000,000 shares of Common Stock, par value $0.001 per
share, of which 10,500,000 shares will be issued and outstanding
prior to the successful consummation of the Private Placement.
(iv) There are no outstanding subscriptions, warrants, options, calls or
commitments of any character entitling any person or entity to
purchase or otherwise acquire any capital stock or other securities
or other equity interests of Zstar.
(i) Apex represents and warrants to Zstar that (both as of the date of
the Stock Purchase Agreement and of the Closing, unless otherwise
specified herein):
<PAGE>
(ii) Apex is a corporation duly organized, existing and in good
standing, under the laws of Canada.
(iii) Except as set forth on its financial statements, to be provided to
Zstar prior to the execution of the Stock Purchase Agreement, or
such as may have arisen in the ordinary course of business, there
are no debts, liabilities or obligations, contingent or otherwise,
of Apex, or otherwise affecting Apex or its assets, which debts,
liabilities or obligations would substantially alter the financial
condition of Apex.
(iv) The financial statements of Apex delivered to Zstar are accurate
and complete, have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout
the period indicated, and fairly present Apex's financial
position, results of operations and cash flow at the respective
dates thereof and for the periods therein indicated.
(v) As of the Closing, the only authorized capital stock of Apex will
consist of 100,000 shares of Common Stock, with no par value per
share, of which 100 shares will be issued and outstanding.
(vi) Other than the Stock Purchase contemplated hereby, there are no
outstanding subscriptions, warrants, options, calls or commitments
of any character entitling any person or entity to purchase or
otherwise acquire any capital stock or other securities or other
equity interests of Apex.
(vii) Since the date of its last financial statement, there have not
been, and during the period between the execution of the Stock
Purchase Agreement and the Closing there will not be, any
material adverse changes in the financial condition affecting
Apex, other than those arising from the ordinary course of
business.
(viii) Except as disclosed to Zstar, Apex has not been involved in any
litigation, government investigation or other government
proceeding and, to the best knowledge of Apex and its existing
shareholders, no litigation, government investigation or other
government proceeding is threatened against Apex.
Apex specializes in the sale of Hotel rooms (retail and wholesale) and
land tour packages throughout Asian and North American markets. Apex
has an established clientele and a website at www.apexholidays.com
that will become the portal for users of the Zstar's service. Zstar
plans to use internet software to further develop and enhance Apex's
existing web site; with plans to eventually create a virtual 'shopping
centre" of travel products. Eventually, the Zstar expects to be able
to expand its offerings to include properties in Europe, Australia and
South America.
As a condition precedent to the consummation of the Stock Purchase,
the terms of the definitive Stock Purchase Agreement shall have been
approved by the shareholders of both Zstar and Apex.
The officer of each of Zstar and Apex signing the Stock Purchase
Agreement will be duly authorized by the respective board of directors
of each such company.
The number of (i) persons on Apex's board of directors, and (ii)
officers shall be increased upon consummation of the Stock Purchase
appropriately. At any time prior to the Closing, the parties may, by
written agreement approved by their respective boards of directors,
amend, modify or waive compliance with, any of the conditions,
covenants or provisions of the Stock Purchase Agreement.
The Stock Purchase Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the
internal law of the State of California.
(4) Apex and Zstar agree that all the information received by either of them
in connection with the Stock Purchase, excluding any information which is
generally known to the public or subsequently becomes generally known to the
public in a manner not resulting directly or indirectly from any act or
omission on the part of such party in violation of this paragraph, shall be
deemed to be confidential information, and such confidential information
shall not be disclosed by such party receiving it to any other
<PAGE>
person or entity, except to its directors, officers, employees, agents or
affiliates to whom or which disclosure is reasonably necessary and except as
may otherwise be required by any applicable law.
(5) The Closing shall occur on or about May 15, 1999 or as soon as possible
after the completion of the Private Placement.
(6) Except for paragraph 4 above, this Letter of Intent represents an
expression of intent only. Accordingly, neither Zstar nor Apex will be bound
by any terms of this Letter of Intent other than as set forth in the
preceding sentence. Instead, the Stock Purchase Agreement, if and when
executed, will be the binding agreement between the parties. Unless the
Stock Purchase Agreement is entered into, neither party shall be under any
obligation to the other, regardless of any negotiations, agreements or
undertakings between, or actions taken by, any party, except as set forth in
the first sentence of this paragraph.
(7) This Letter of Intent may be signed in multiple counterparts, each of
which shall be deemed to be an original, and all such counterparts shall
constitute but one instrument.
(8) For purposes of construction and interpretation, Zstar and Apex agree
that this Letter of Intent shall be governed by, and construed in accordance
with, the law of the State of Nevada, without regard for the conflict of laws
principles thereof.
If you agree that this letter correctly sets forth our mutual intent, please
so indicate by signing the enclosed copy of this letter and return it to me.
Sincerely,
Zstar Enterprises, Inc.
By: s/ Chui Keung Ho By: s/ Shelley James
Chui Kueng Ho, President Shelley James, Secretary
Agreed and Accepted
this 2nd day of September, 1998
Apex Canadian Holidays Ltd.
By: s/ David Ho
David Ho, President
