ZSTAR ENTERPRISES INC
Filing Type: 10KSB
Description: Annual Report
Filing Date: May 30, 2000
Period End: Feb 29, 2000
Primary Exchange: Over the Counter
Includes OTC and OTCBB
Ticker: ZSTAR
ZSTAR ENTERPRISES, INC.
Table of Contents
10KSB
PART I.......................................3
ITEM 1.......................................3
Table 1......................................6
Table 2......................................6
ITEM 2.......................................17
ITEM 3.......................................17
ITEM 4.......................................18
PART II......................................18
ITEM 5.......................................18
ITEM 6.......................................20
Table 3......................................21
Table 4......................................22
ITEM 7.......................................36
Table 5......................................38
Table 6......................................39
Table 7......................................40
Table 8......................................41
Table 9......................................44
Table 10.....................................46
Table 11.....................................47
ITEM 8.......................................51
PART III.....................................51
ITEM 9.......................................51
ITEM 10......................................52
ITEM 11......................................53
Table 12.....................................53
ITEM 12......................................54
ITEM 13......................................54
EX-3(i)......................................56
EX-3(ii).....................................58
EX-4.1.......................................70
EX-4.2.......................................72
EX-10........................................83
EX-21........................................91
EX-27........................................91
EX-99........................................92
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street N.W.
Washington, D.C. 20549
FORM 10-KSB
(Mark one)
(x) Annual Report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the fiscal year ended February 29, 2000.
( ) Transition report under Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from ______ to _______
Commission File Number 1-14815
ZSTAR ENTERPRISES, INC.
(Exact Name of Registrant As Specified In Its Charter)
Nevada 98-019-6675
(State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization)
Suite 3000
595 Burrard Street
Vancouver, B.C. V7X 1L4
(604) 683-1887 Fax: (604) 683-6267
Attention: Paul Wiebe
--------------------------------------------------------
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
---------------------- ---------------------
Common Stock NASD OTC Electronic Bulletin Board
Securities Registered Pursuant to Section 12(g) of the Act:
1
Common Shares $.001 par value
---------------------------------------
Title of Each Class To Be So Registered
Total Number of Pages:______
Index to Exhibits Appears on Page:________
(Filing Stipulated in United States Dollars Unless Otherwise Stated)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No_______
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10KSB.(X)
State issuer's revenues for the most recent fiscal year: $579,849
State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price
at which the common equity was sold, or the average bid and asked
prices of such common equity, as of a specified date within the last 60
days: $81,762,500.
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the last practicable date: As of May 1,
2000, there were 10,550,000 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB into which the
document is incorporated: (1) any annual report to security holders; (2)
any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for
identification purposes (e.g., annual reports to security holders for fiscal
year ended December 24, 1990).
Transitional Small Business Disclosure Format (check one):
Yes __________ No X
2
ZSTAR ENTERPRISES, INC.
FORM 10-KSB ANNUAL REPORT--2000
TABLE OF CONTENTS
PAGE
PART I 3
Item 1. Description of Business 3
Item 2. Description of Property 17
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of
Security Holders 18
PART II 18
Item 5. Market for Common Equity and Related
Stockholder Matters 18
Item 6. Management's Discussion and Analysis
or Plan of Operations 20
Item 7. Financial Statements 36
Item 8. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 51
PART III 51
Item 9. Directors, Executive Officers,
Promoters and Control Persons;
Compliance with Section 16(a) of
the Exchange Act 51
Item 10. Executive Compensation 52
Item 11. Security Ownership of Certain Beneficial
Owners and Management 53
Item 12. Certain Relationships and Related
Transactions 54
Item 13. Exhibit List and Reports on Form 8-K 54
PART I
Item 1 Description of Business
A. INTRODUCTION
Zstar Enterprises, Inc. ("Company") was organized under the
laws of the State of 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 May 1, 2000. The Company is a new Nevada
corporation formed by a small funding 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.
3
The Company, on February 28, 1999, acquired all of the issued
and outstanding shares of stock of Apex Canadian Holidays Ltd., a
British Columbia, Canada, corporation ("Apex"), for a sum of $50,000,
full and final payment of which was made on April 28, 1999. A
description of Apex's operations has been more fully set forth in
Paragraph C below.
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's subsidiary Apex is in charge of the
travel industry portion of the business. In the future, Apex may be
spun off from the Company, as the Company seeks to invest and/or
acquire new companies in other areas of business. To this end, the
Company entered into a Merger Agreement with OnVantage, Inc. on
May 26, 2000. (See "Recent Developments", page 25).
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 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
4
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-KSB includes forward-looking statements. All statements,
other than statements of historical fact, included in this Form 10-KSB,
including, without limitation, statements under "Description of Business"
and "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-KSB, including, without limitation, in
conjunction with the forward-looking statements included in this Form
10-KSB.
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.
IMPLICATIONS OF THE INTERNET FOR THE TRAVEL INDUSTRY
Internet-related technologies can help promote products in a less
expensive and more interactive way than is currently possible with
print media and other traditional means 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 may 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:
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.
5
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 end of 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.
PROJECTED ONLINE SHOPPING REVENUE BY CATEGORY, 1998-2000
1998 1999 2000
COMPUTER PROD. $ 701 $1,228 $2,105
TRAVEL 672 961 1,579
ENTERTAINMENT 420 733 1,250
APPAREL 163 234 322
GIFTS & FLOWERS 222 386 658
FOOD & DRINK 149 227 336
OTHER 144 221 329
TOTAL $2,371 $3,990 $6,579
Source: Forrester Research
C. APEX CANADIAN HOLIDAYS LTD.
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 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's sales for the fiscal year ending February 28, 1998 were
adversely affected by a key employee leaving the Company while its sales
for the fiscal year ending February 28, 1999 were adversely effected by
the Asian crisis. The fiscal year ending February 29, 2000 saw a profit
and management expects to see a profit this year.
Apex's Financial Summary from operations (in Canadian dollars):
AUDITED AUDITED UNAUDITED UNAUDITED UNAUDITED
2000 1999 1998 1997 1996
FISCAL YR FISCAL YR FISCAL YR FISCAL YR FISCAL YR
Sales $861,540 $712,191 $829,128 $1,124,618 $1,129,696
Gross Margin$113,429 86,350 97,604 113,476 109,898
Net Income/ $5,445 (3,107) (19,626) (388) (12,815)
Loss)
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KEY PERSONNEL OF APEX
DAVID HO, PRESIDENT OF APEX
Mr. Ho is currently the President of Apex Travel, Ltd., a company
involved in the retail and wholesale sale of travel packages. Mr. Ho
was also the President and a Director of Azel Enterprises, Inc., a
telecommunications company involved in the production of fiber optics.
Mr. Ho is fluent in Cantonese and English.
YEH 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 trilingual, speaking 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.
LYNX INTERNET AND MARKETING
The Company has entered into an agreement with LYNX Internet
& Marketing ("LYNX") of Vancouver, British Columbia, Canada, a local
Internet Service Provider ("ISP"). LYNX will provide the hardware
server space for Apex. The Company has determined that this
agreement is sufficient for the Company's current needs.
ALLNIGHTWONG: THE WEBSITE DEVELOPER
The Company has entered into a contract with a website designer,
Allnightwong Website Development to develop a Website that is expected
to meet the Company's business objectives. The Company has determined
that this agreement is sufficient for its current needs.
OPERATIONS
With the acquisition of Apex, the Company now has a fully
functional travel and hospitality related company. The employees
of Apex are expected to be primarily involved in customer service,
confirming bookings with hotels and sales/negotiations with hotel
properties. The Company also anticipates that additional hotels
may be accessible through the Apex travel services. The Company's
management presently anticipates that, if and when the Company's
website becomes fully operational, the Company will require
additional employees. The Company expects that there should not
be a significant increase in the number of employees needed.
Specifically:
7
- 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 is expected to be via
its website, a toll-free telephone number will also be made available
in the event that clients need immediate customer 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 is to 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.
The Company may, from time to time, choose to engage independent
consultants who have expertise in the Internet-related travel
business, and in other forms of e-Commerce.
The Company anticipates that it will voluntarily file periodic
reports as required by the Securities and Exchange Act of 1934 (the
"1934 Act"), even if its statutory obligation to file such reports is
suspended thereunder.
D. PRODUCTS AND SERVICES
Apex specializes in the sale of hotel room (retail and wholesale)
and land tour packages primarily in the Asian and North American
markets. 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).
8
The Company has not begun offering its services on the Internet.
The Company plans to 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 are
expected to be featured, ranging from urban locations to vacation
settings. The Company anticipates that strategic partnerships could
help 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 plans to be unique in three ways:
(i) it intends to 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 should enable the target hotels to get greater
exposure, in a cost-effective manner. The Company expects to 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 expects to 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 can expect to 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 are expected to have
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 is expected to allow for customization.
Various travel agencies and tour companies offer hotel and tour
packages. As the Company's system expands, it may be able to target
users with offerings designed especially with their preferences in mind.
Users are expected to be able to simply access the Company's site and
browse through it using a dedicated search engine. Booking hotel rooms
should 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.
9
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 anticipates selling 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 are planned to 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 the need to 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
ASSUMING A SUCCESSFUL LAUNCH OF ITS WEBSITE, THE COMPANY
ANTICIPATES THAT:
Users of the Company's service are expected be able to log on to the
Company's website, browse hotel properties, make inquiries as to room
availability and book their own reservations.
The Company proposes to design its service using existing
Internet software and hardware technologies. An integrated hardware
and software system is planned to be strategically designed to provide
an efficient, secure service for users.
COMPETITIVE ADVANTAGES
It is anticipated that the Company will strive to 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 is expected to 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.
10
(ii) CUSTOMER FOCUS: A numbers of travelers prefer the
intimacy and uniqueness of smaller hotel properties. The
Company expects to target this customer base. Users who visit the
site will be asked questions relating to their travel needs and
preferences. The Company expects to 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
expects to provide destination information relating to the city,
region, climate, visa requirements, points of interest, etc. The
Company anticipates providing 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, but there is no assurance, that the Company expects
to 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 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.
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E. MARKETING STRATEGY
As an Internet-based service, the Company intends to develop a presence
on the World Wide Web. One important factor to the Company's success is
expected to be the strategic use of Internet links and keywords. Its
strongest product feature should be that hotel rooms are expected to be
sold at very competitive prices pursuant to pre-existing contracts that the
Company expects to have with individual hotels. An important factor 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 are expected to 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 may be targeted with press releases.
Advertising may be purchased in key publications such as Conde Nast
Traveler, Destinations, various in-flight magazines and local newspaper
travel sections.
The Company may 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 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.
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.
COMPETITION
As for the travel industry aspect of the Company's current
business plan, there are numerous web sites currently providing hotel
reservations via the Internet. The Company's research shows that the
majority 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 some of the websites that the Company's
management foresees will be in direct competition with the Company.
12
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):
The Company plans to 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's chosen ISP should 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.
13
F. MARKETING
The Company recognizes that its success will depend on a range of issues,
including how well it structures its Internet based advertising and marketing
strategy, and that the level of success will very likely be dependent upon
raising substantial amounts of capital to fund sales and marketing
activities. 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's management is aware that most people
find Internet sites primarily through recommendations, electronic
directories, magazines or journals and Usenet groups and intends to 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.
THE FOLLOWING DESCRIBES WHAT THE COMPANY COULD DO, BASED ON A
SUCCESSFUL LAUNCH OF ITS WEBSITE. IT SHOULD BE NOTED THAT CURRENTLY,
ALL ACTIVITIES DESCRIBED IN THIS SECTION OF (F.) ARE HYPOTHETICAL
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 should 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 plans to investigate opportunities
to advertise with such operators.
DIRECTORIES
The Company plans to register its domain name with as many
electronic directories as possible such as Yahoo and Alta Vista, and
intends to regularly update all links.
14
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.
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 anticipates
providing 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 expects to provide an e-mail
address for clients that should 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 could allow the Company
to take an active marketing role for special promotions, new products
and so on.
15
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. E-mail would allow
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.
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 expects to have the ability to instantly satisfy this need
through the use of various Internet tools.
The Company intends to keep an order's status readily available on its
computer system and by implementing an Internet-based client reservation
tracking system, is expected to 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
Subject to the sale of Apex, the Company intends to offer its
clients a virtual catalogue of hotel properties and related travel
products. For information about the sale of Apex, see "Recent
Developments" (page 25).
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:
- 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 plans 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 plan to actively work to develop inter-corporate
relationships and spot new opportunities.
16
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,
encouraging vigorous competition which the Company may not survive.
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's 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 Description of Property
Apex operates from its leased facility on a month-to-month basis which
it rents for approximately $1,000 per month.
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 other than that disclosed in the Company's
consolidated financial statements (see Item 7).
Item 3 Legal Proceedings
The Company is not a party to any material litigation or
governmental proceedings that management believes would result in
judgments or fines that would have a material adverse effect on the
Company.
17
Item 4 Submission of Matters to a Vote of Security Holders:
5/31/99: Directors Elected: Chui Keung Ho, CEO, President
Shelley James, CFO, Secretary,
Treasurer
10,500,000 voted For; 50,000 Non-Votes
8/31/99: Same as above
11/31/99: Same as above
At present, pursuant to the by-laws and Articles of Incorporation
of the Company, the Board has elected new directors. Currently, the
President and CEO of the Company is Eric White. David Paul Wiebe is
on the Board of Directors. Shelley James resigned from the Board of
Directors. Ross Wilmot was briefly on the Board of Directors, but has
since resigned.
No other matters were submitted to the Company's shareholders
for a vote, nor were proxies solicited for the last Quarter. However,
the Board of Directors of the Company plans to submit several
proposals to the shareholders and request their written consent in
the near future (See "Recent Developments", page 25).
PART II
Item 5 Market For Common Equity and Related Stockholder
Matters
The Company's common shares began trading on the NASD
Over-the-Counter Electronic Bulletin Board ("OTCBB") on March 17,
2000 under the symbol ZSTR. Accordingly, there is no market price
information available prior to March 17, 2000.
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 May 1, 2000, there are 10,550,000 of total outstanding 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,
(the"Act")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 former 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. Subject to the February 1999
amendments to 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 OTCBB, may be resold
in brokerage transactions without restriction.
18
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 provide 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 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.
The Company's shares of common stock are currently being traded
on the OTCBB.
For the fiscal year ended February 28, 2000, the Company did not
sell any shares on any open market. On March 17, 2000, the Company
began trading on the OTCBB and shares closed on March 17, 2000 at
$11 1/4. As of May 15, 2000, the shares closed at $7 1/2.
The effective date of the registration statement is September 28,
1999 and the Commission File Number assigned to the Registration
Statement is 1-14815.
An offering of securities has not commenced because the
Company became a reporting company under the 1934 Act and all stock
was freely transferable. The Company registered the stock in order to
become eligible for quotation on the NASD OTCBB.
The Company intends to make additional private placements that
are exempt from registration pursuant to Regulation S or Regulation D
pursuant to the Act to raise capital for working capital and potential
acquisitions.
There were no expenses for issuance of securities registered for
underwriting discounts & commissions, finder's fees, expenses paid to or
for underwriters, or other expenses.
The Company plans on spending about $10,000 for additional
computers and computer-related items.
19
Item 6 Plan of Operation
Revenues were not earned in the fiscal year 1998; revenues were
earned in the fiscal year 1999. The fiscal year ending on February 29,
2000 showed revenues of $579,849, with a deficit of $324,242.
A. PLAN OF OPERATION
Technical Development February, 2000 onward
Beta Testing August, 2000
Operational Online Reservation System August, 2000
Develop Strategic Partnerships September, 2000
Website to start generating revenues January, 2001
In the event the Company has not achieved certain milestones, the
Company could face liquidity problems. If the Company's outstanding
demand notes are called in, the Company could face serious cash flow
and liquidity problems. There can be no assurance that the Company will
be able to consummate financing, or that even if such financing is
consummated that the Company will not face liquidity problems or that
each financing will be on economic and other terms acceptable to the
Company.
Since its incorporation, the Company has successfully completed
its first round of financing pursuant to which it has raised approximately
$241,500. Further financing will be accomplished through private
placements. Lynx Internet and Marketing had begun developing an
Internet shopping program for the Company's proposed website. Since
that time, a new web site developer, Allnightwong Website Design, has
been retained to develop the web site. The Company expects the website
to become operational in August, 2000.
To meet its immediate working capital requirements, the
Company has secured a short-term loans in the amount of $100,000 and
$150,000 from Haliun Hongorzul (the "Lender"), an existing shareholder
of the Company. The loans are evidenced by promissory notes, (the "Notes")
dated August 17, 1999 and February 23, 2000 respectively, which are
payable by the Company on demand by the Lender and are secured by a
general security interest in all assets of the Company.
If all of the operating expenses remain constant, the Company can
satisfy its cash flow demand for the next twelve months. This is subject
to the Notes not being paid and all of the expenses and liabilities from
last year being constant.
20
B. FINANCING REQUIREMENTS
The Company requires a total equity investment of $500,000 to
be made during the first 24 months of operations (of which $241,000 has
already been raised). All proceeds raised will be used specifically for
start-up costs, purchase of capital assets, marketing and for working
capital.
Phase I - Start Up, Year 1
----------------
Equipment and Start-Up Costs $ 35,000
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
======
- 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 twelve months. If, however, the
promissory notes held by Haliun Hongorzul are called in, the Company
will have significant cash flow and liquidity problems as the Company
currently does not have sufficient assets to make this payment. In order
for the Company to expand operations, it will need to find additional
investors either in the form of a private placement or otherwise.
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. The Company is not subject to any
unsatisfied judgments, liens or settlement obligations.
21
The following table sets forth selected financial information with
respect to the Company for the periods indicated. The data is derived
from financial statements prepared in accordance with U.S. and Canadian
generally accepted accounting principles. There are no significant
differences between Canadian and U.S. accounting principles requiring
adjustments to the financial statements of the Company (see
accompanying notes to the financial statements). The selected financial
data should be read in conjunction with "the Plan of Operation," and
accompanying notes included elsewhere in this Filing.
CONSOLIDATED CONSOLIDATED
AUDITED AUDITED
BALANCE SHEET (IN $US) AS AT FEB. 29, 2000 AS AT FEB. 28, 1999
Cash $165,597 $ 88,165
Working Capital $(138,488) $(33,076)
Total Assets $249,340 $203,169
Shareholders' Equity $(69,907) $ 42,861
STATEMENT OF OPERATIONS
(IN $US) FROM 3/1/99-2/29/00 FROM 6/17/98-2/28/99
Revenue $579,849 $ 0
Cost of Sales $504,379 $ 0
Gross Profit $75,470 $ 0
General and
Administrative
Expenses $209,073 $ 190,639
Loss for the Period $(133,603) $(190,639)
NET LOSS PER
COMMON SHARE $(0.01) $(0.02)
Shares Outstanding 10,550,000 10,550,000
22
D. RESULTS OF OPERATIONS
1. RESULTS OF OPERATIONS AS OF FEBRUARY 29, 2000
a. REVENUES - The Company has earned revenue in the
last year from non-Internet sales. The Company has
earned no revenue from Internet sales, although the
Company anticipates that the Internet will be a source of
revenues once the website is fully operational. 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 SALES - As of the fiscal year ended February
29, 2000 the Company has incurred $504,379 in costs of sales.
The cost of sales consist of payments to third parties including,
resellers of hotel rooms, Internet service providers,
artists, royalty payments, 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.
2. RESULTS OF OPERATIONS FROM MARCH 1, 1999 to FEBRUARY 29, 2000.
The Company recorded revenues of approximately $580,000
primarily from the sale of non-Internet hotel bookings. The Company
believes that the majority of the Company's future revenues will result
from the sale of hotel bookings and advertising space on the Company's
website. The Company is considering acquisitions of other companies as
an investment vehicle.
Cost of sales, mainly to third parties, from resale of hotel
rooms amounted to $504,000 or 87% of revenues.
General and Administrative Expenses amounted to approximately
$209,000 or 36% of revenues. The Company expects that future costs
will consist primarily of costs associated with the Company's various
strategic alliances, external advertising, promotion, trade show,
consulting, legal fees, advertising sales and personnel expenses associated
with marketing of the Company's website.
The Company reported a loss of $134,000 or 23% of revenue in the fiscal
year ended February 29, 2000.
23
3. RESULTS OF OPERATIONS, YEAR ENDED FEBRUARY 29,2000 AS COMPARED TO
FEBRUARY 28, 1999
The Company had sales of $580,000 for the year ended February 29, 2000
as compared to $ 0 for the period ended Febraury 28, 1999. The increase of
$580,000 is attributable to the acquisition of Apex Canadian Holidays Ltd
on February 28, 1999.
Apex's sales increased to $580,000 for the year ended February 29, 2000
from $478,000 for the year ended February 28, 1999. The increase of
$120,000 (21%) is attributable to an easing of the Asian crisis.
Cost of sales increase during the year ended February 29, 2000 to
$504,000 from $0 for the period ended February 28, 1999. The increase
of $504,000 relates to the Apex acquisition. Apex's cost of sales increased
to $504,000 for the year ended February 29, 2000 from $420,000 from the
year ended February 28, 1999. The increase of $84,000 (20%) is attributable
to increased sales.
Operating expenses increased to $209,000 for the year ended February
29, 2000 from $191,000 for the year ended February 28, 1999, an increase
of $18,000 (9%). The net increase is attributable to the acquisition of
Apex offset by a reduction in start up expenses.
The Company had a net loss for the year ended February 29, 2000 of
$134,000 as compared to a net loss of $191,000 for the period ended
February 28, 1999, a decrease of $57,000 (30%). The decreased loss of
$57,000 is attributable to the aforementioned detail of sales and
expenses and a full year operations for the Company.
4. LIQUIDITY AND CAPITAL RESOURCES, FEBRUARY 28, 1999 to
FEBRUARY 29, 2000
At February 29, 2000, the Company had cash of $166,000 as compared
to cash of $88,000 at February 28, 1999 an increase of $78,000 (89%).
The increase results from the Company using $122,000 in its operations,
while the Company was able to generate cash by issuing demand notes
for $250,000 and paying down the note for the acquistion of Apex of
$50,000.
In the short term, the Company will not have sufficient revenues
to generate positive cash flow. However, the Company believes that
its cash on hand together with additional borrowings and/or equity
sales will be sufficient to fund its capital expenditures and working
capital requirements for at least the next 12 months.
In the long term the Company may require additional capital for
new business activities related to its current and planned businesses,
or in the event it decides to make additional acquisitions or enter
into joint ventures and strategic alliances. Sources of additional
capital may include cash flow from operations, public or private equity
and debt financings, bank debt, and vendor financings. However, we
cannot assure you that the Company will be successful in producing
sufficient cash flow or raising debt or equity capital to meet its
strategic business objectives or that such funds, if available, will
be available on a timely basis and on terms that are acceptable to
the Company. If the Company is unable to obtain such capital,
it may have to delay or curtail business operations.
24
E. RECENT DEVELOPMENTS
The Board of Directors of Zstar (the "Board") plans to submit
several proposals for shareholder approval. The following list highlights
the items the Board will submit to Zstar shareholders for their approval,
which will be sought by means of written consent. The Board will not ask
for proxies from shareholders, nor will the Board accept any proxies.
1. The Merger Proposal
The Board has adopted a Merger Agreement ("Merger") with
OnVantage, Inc., a Delaware corporation ("OnVantage"), in which a
wholly owned subsidiary of Zstar, a Delaware corporation ("Zstar
Subsidiary"), will merge into OnVantage, and OnVantage will be the
surviving corporation of the merger ("Surviving Corporation"). The
Board has determined that the Merger Agreement is in the best interest
of Zstar.
If the Merger is completed, holders of OnVantage Common Stock will
receive 20,190,000 Shares of Common Stock of Zstar ("Zstar Shares")
in exchange for the Total Capital Stock of OnVantage. Current Zstar
Shareholders will continue to hold their existing Zstar Shares after
the Merger. PLEASE NOTE THAT THE MERGER WILL RESULT IN A CHANGE OF
CONTROL OF ZSTAR. AFTER THE EXECUTION OF THE MERGER, ONVANTAGE
SHAREHOLDERS WILL OWN 63.11% OF ZSTAR.
2. Proposal to Increase the Number of Authorized Shares
The current number of authorized shares of common stock
of Zstar ("Shares") is 30,000,000, with 10,550,000 Shares issued and
outstanding. In order to effectuate the Merger, Zstar must amend
its Articles of Incorporation to increase the number of authorized
Shares from the current 30,000,000 Shares to 100,000,000 Shares.
The increased number of authorized shares will permit the issuance
of 20,190,000 Shares of Zstar to OnVantage shareholders in exchange
for the Total Capital Stock of OnVantage.
3. Proposed Sale of Apex
As a condition precedent to the Merger, the Board seeks
authorization to sell Apex Canadian Holidays Ltd., a wholly-owned
subsidiary of Zstar and incorporated under the laws of the Province
of British Columbia ("Apex"), in the event the Board, in its discretion
deems such a sale necessary or preferable. In conjunction with the
sale, Apex will sever all corporate ties with Zstar and exist as an
independent entity.
25
4. Proposal to Adopt Stock Option Plan
The Board has submitted a plan to shareholders for the adoption of
a stock option plan ("Zstar 2000 Stock Option Plan"). The maximum
aggregate number of shares of common stock subject to the Zstar 2000
Stock Option Plan is 5,000,000. The shares may be authorized but
unissued, or reacquired common stock. Within the first 12 months
from the Closing of the Merger, total additional issuances under
option grants shall not exceed 3,325,000 shares.
5. Proposal to Authorize an Undesignated Class of Preferred Stock
The Board seeks authorization of an undesignated class of preferred
stock ("Preferred Stock"). Currently, the issuance of Preferred Stock is
not authorized under Zstar's Articles of Incorporation. The terms and
description of the class of preferred stock are undefined at the date of
this Information Statement. The Board of Directors has requested that the
shareholders grant the Board of Directors the authority to fix the
dividend rate and establish the provisions, if any, relating to voting
rights, redemption rate, sinking fund, liquidation preferences and
conversion rights for any series of Preferred Stock issued in the
future. Such preferences may place holders of Preferred Stock in
a superior position to holders of Zstar Common Stock.
6. Proposal for Redomestication of Zstar
Currently, Zstar is incorporated and domiciled in the State of
Nevada. The Board has determined that it may be in the strategic
best interest of Zstar for Zstar to reincorporate as a Delaware
corporation. The Board believes that the redomestication to
Delaware may enhance Zstar's ability to attract new investors in the
future. Therefore, the Board has requested the authority to redomesticate
Zstar to Delaware. Please note that while redomestication is
probable, it is not certain to occur. Once authorization is given to
the Board, the Board will make a determination on redomestication
in the near future, based on the best interest of Zstar and its
shareholders.
7. Proposal for Name Change
The Board has submitted a proposal to shareholders to change the
name of Zstar Enterprises, Inc. to OnVantage, Inc. In order to avoid
any confusion with the Surviving Corporation of the Merger, which is
also known as OnVantage, Inc., the name of the Surviving Corporation will
be changed to OnVantage Technologies, Inc.
8. Election of the Board of Directors
The annual election of the Board of Directors has been submitted
for shareholder vote.
9. Matters Not Submitted for Shareholder Approval
Zstar plans to make a private offering of 625,000 Units at $6.00
per Unit (the "Offering"). Each Unit will be comprised of one Share of
Common Stock of Zstar and one purchase warrant ("Purchase Warrant").
Each Purchase Warrant will entitle the holder to acquire one Share of
Common Stock in Zstar for $6.00 per a period of two years from the closing
of the Merger Agreement. The Purchase Warrants will be forced to convert
within 15 days of the "Performance Milestone", if the Performance Milestone
is achieved. All common shares underlying the Unit are to have demand
registration rights and be qualified for resale to the public through an SB-2
registration statement (at the expense of the Company) within 150 days of
closing of the Merger Agreement. Zstar will use the funds from the private
placement offering to make investments in OnVantage Technologies, Inc., its
wholly owned subsidiary after the Merger.
26
F. RISK FACTORS FORESEEN BY MANAGEMENT
In addition to other information in this Form 10-KSB, the
following important factors should be carefully considered in
evaluating the Company and its business because such factors
currently have a significant impact on the Company's business,
prospects, financial condition and results of operations.
SUCCESS OF BUSINESS - The Company may not be successful in
its effort to further its Business. 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.
IF THE COMPANY DOES NOT SUCCESSFULLY DEVELOP NEW AND
ENHANCED SERVICES AND PRODUCTS, ITS REVENUES COULD
DECREASE - The Company will not be financially successful if it is
unable to meet the increasingly sophisticated needs of its
customers through timely developments and new and enhanced
versions of its services and products. The Company's planned
development and enhancement efforts have inherent risks. The
Company may experience financial or technical difficulties that
could prevent it from introducing new or enhanced information
services or transaction support products. Furthermore, these new
or enhanced services and products may contain problems that are
discovered after the products are introduced. The Company may
need to significantly modify the design of these products to correct
problems. The Company's business could be materially adversely
affected if the Company experience difficulties in introducing new
or enhanced services and products or if these services or products
are not received favorably by its customers. Finally, development
and enhancement of its services and products will require
significant additional expenses and could strain the Company's
management, financial and operational resources. The lack of
market acceptance of the Company's services or products or its
inability to generate satisfactory revenues from such development
or enhancements to offset their costs could have a material
adverse effect on the business.
IF THE COMPANY DOES NOT EXPAND ITS GEOGRAPHIC COVERAGE,
THE COMPANY'S SERVICES AND PRODUCTS COULD BECOME LESS
DESIRABLE - The Company believes its success is highly dependent
on its ability to increase the geographic coverage of its database. If
the Company is not able to expand the geographic coverage of its
database into other markets, the Company's business could be
materially adversely affected. The Company expect this geographic
expansion effort to impose additional burdens on its research, sales
and administrative resources.
RECENT HISTORY OF LOSSES - The Company incurred net losses of
$133,603 and $190,639 for the years ended February 29, 2000 and
February 28, 1999, respectively. The Company expects that losses
will continue until such time, if ever, as the Company increases its
market share. In addition, the Company had an accumulated deficit
of $324,242 at February 29, 2000.
27
EARLY STAGE OF DEVELOPMENT - The Company has generated
limited revenues to date. While the Company is able to finance
certain of its current operations from revenues, it requires additional
financing to increase its travel activities and Internet-related
activities to acquire additional technologies and to develop new
products. The Company's operations are subject to all of the risks
inherent in the commercialization of new products. The likelihood
of the success of the Company must be considered in light of the
problems, expenses difficulties, complications, and delays
frequently encountered when developing new markets.
IF THE COMPANY CANNOT MAINTAIN THE INTEGRITY AND
RELIABILITY OF ITS PROPRIETARY DATABASE, THE COMPANY MAY
NOT BE SUCCESSFUL - The Company cannot assure you that the
information in its database will be comprehensive, accurate or
timely, particularly as the Company grow. The Company's success
is highly dependent on its customers' confidence in the
comprehensiveness, accuracy and timeliness of its proprietary
database of transactions and the software used to access its
database. The Company expect the task of establishing and
maintaining such comprehensiveness, accuracy and timeliness
during the growth of its business to require substantial effort and
expense.
CYCLICAL ECONOMIC SWINGS IN THE TRAVEL AND HOSPITALITY
MARKET COULD DECREASE DEMAND FOR ITS SERVICES AND
PRODUCTS - The industry traditionally has been subject to cyclical
economic swings which could materially adversely affect its
business. These cyclical economic swings may be caused by
various factors, such as changes in airline tickets prices, interest
rates and in economic conditions.
CONSOLIDATION OF THE TRAVEL AND HOSPITALITY INDUSTRY
COULD NEGATIVELY IMPACT THE COMPANY'S BUSINESS - The
industry is undergoing a period of consolidation, motivated in part
by a desire to reduce expenses. Such consolidation poses a number
of risks and could materially adversely affect the Company's
business. These risks include:
- a decrease in the Company's client base;
- reduction in the size of the Company's target market;
- creation of competitors with sufficiently greater bargaining
power which could cause price erosion;
- creation of competitors with access or rights to, or
ownership of, sources that provide the data the Company need for
its proprietary database; and
- reduction in the number of sources from whom the Company obtains
data for its proprietary database.
IF THE COMPANY ACQUIRES OTHER COMPANIES BY ISSUING
EQUITY SECURITIES, YOU MAY EXPERIENCE DILUTION OF YOUR
EQUITY INTEREST - The Company may acquire other companies by
issuing equity securities. As a result, you may experience dilution of
your ownership interest and the newly issued securities may have
rights superior to those of the common stock.
28
VARIOUS PARTIES MAY ACCUSE THE COMPANY OF INFRINGING ON
THEIR INTELLECTUAL PROPERTY RIGHTS, AND ANY RELATED
LITIGATION COULD HARM ITS BUSINESS REGARDLESS OF ITS
MERIT - Third parties may assert claims against the Company
alleging infringement, misappropriations or other violations of
proprietary rights, whether or not such claims have merit. Such
claims can be time consuming and expensive to defend and could
require the Company to cease the use and sale of allegedly
infringing services and products, incur significant litigation costs and
expenses, develop or acquire non-infringing technology or obtain
licenses to the alleged infringing technology. The Company may not
be able to develop or acquire alternative technologies or obtain
such licenses on commercially
acceptable terms.
THE COMPANY COULD BE HELD LIABLE FOR PROVIDING
INACCURATE OR INCOMPLETE INFORMATION, WHICH COULD
HARM ITS BUSINESS - If the Company's services or products yield
inaccurate or incomplete information which has a material adverse
impact on a customer, the customer might bring a claim for
damages against the Company, even if the Company is not
responsible for such failure. The limitations of liability set forth
in customer contracts may not be enforceable and may not otherwise
protect the Company from liability for damages. The successful
assertion of one or more large claims against the Company that
exceed available insurance coverage's or changes in the Company's
insurance policies, such as premium increases or the imposition of
large deductibles or co-insurance requirements could materially
adversely affect the Company's business.
IF THE COMPANY IS NOT ABLE TO SUCCESSFULLY DEVELOP ITS
INTERNET WEBSITE BRAND NAME, IT COULD MATERIALLY
ADVERSELY AFFECT ITS BUSINESS. The Company believes that
establishing and maintaining its brand name is critical to
attracting and expanding its target Internet audience. The importance
of developing the Company's brand name will increase due to the
growing number of Internet services. In order to build its brand
name, the Company must succeed in its marketing efforts, provide
high-quality services and products and increase the number of
visitors to its Web site. If its marketing efforts are not successful or
if the Company cannot increase awareness of its brand name, the
Company will not be able to attract and retain Internet users and its
business would be materially adversely affected.
IF THE COMPANY IS UNABLE TO CONTINUE TO DEVELOP ITS
DIRECT SALES FORCE, IT COULD MATERIALLY ADVERSELY AFFECT
ITS BUSINESS - In order to support its growth, the Company need to
substantially increase the size of its direct sales force. The
Company's ability to increase its direct sales force involves a
number of risks, including:
- the competition the Company faces from other companies in
hiring and retaining sales personnel;
- the Company's ability to integrate and motivate additional
sales and sales support personnel;
- the Company's ability to manage a multi-location sales
organization; and
- the length of time it takes new sales personnel to become
productive.
There would be a material adverse effect on its business if the
Company does not continue to develop and maintain an effective
direct sales force.
29
INTENSE COMPETITION MAY RENDER THE COMPANY'S SERVICES
AND PRODUCTS UNCOMPETITIVE OR OBSOLETE - The market for the
Company's Internet-related and non-Internet-related information
services and transaction support products is competitive. The Company
cannot assure you that its competitors will not develop services or
products that are equal or superior to the Company's or that achieve
greater market acceptance. The Company anticipates that the number of
and indirect competitors will increase in the future and could result in
price reductions, reduced margins, greater operating losses or loss
of market share, any of which would materially adversely affect its
business.
ADOPTION OF NEW LAWS AND GOVERNMENT REGULATIONS
RELATING TO THE INTERNET COULD HARM ITS BUSINESS - The
Company's business could be materially adverselyaffected by the
adoption or modification of laws or regulations relating to the
Internet. Laws and regulations directly applicable to Internet
communications and commerce are becoming more prevalent.
Such legislation could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a
communications and commercial medium. The governments of
states or foreign countries might attempt to regulate the Company's
transmissions or levy sales or other taxes relating to its activities.
The laws governing the Internet, however, remain largely unsettled,
even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel and taxation
apply to the Internet and Internet commerce. In addition, the growth
and development of the market for Internet commerce may prompt
calls for more stringent consumer protection laws, that may impose
additional burdens on companies conducting business over the
Internet. The growth and development of the market for Internet
commerce may also prompt calls for widening access on the
Internet to public records, including records concerning the
commercial real estate industry.
INTERNET SECURITY CONCERNS COULD HINDER INTERNET
COMMERCE AND MATERIALLY ADVERSELY AFFECT ITS BUSINESS -
The Company may be required to expend significant capital and
other resources to protect against security breaches on its Web site
or to alleviate problems caused by such breaches. If any
compromise of the Company's security were to occur, it could
damage its reputation and expose the Company to a risk of loss,
litigation and possible liability. A significant barrier to online
commerce and communications is the need for secure transmission
of confidential information over public networks. Concerns over the
security of transactions conducted on the Internet and other online
services, as well as user's desires for privacy, may also inhibit the
growth of the Internet and other online services, especially as a
means of conducting commercial transactions. The Company's
services involve the storage and transmission of proprietary
information, such as credit card numbers and other confidential
information. The Company cannot assure you that its security
measures will prevent security breaches or that its failure to prevent
such security breaches will not have a material adverse effect on its
business. Credit card companies and others are in the process of
developing anti-theft and anti-fraud protections, and the Company
are continually monitoring this problem. However, at the present
time, the real or perceived risk of theft and fraud could have a
material adverse effect on the Company. The Company cannot
assure you that advances in computer capabilities, new discoveries
in the field of cryptography or other events or developments will not
result in a compromise or breach of the algorithms used to protect
customer transaction data. A party who is able to circumvent the
Company's security measures could misappropriate confidential
information or cause interruptions in its operations.
30
THE COMPANY MAY BE SUBJECT TO LEGAL LIABILITY FOR
DISPLAYING OR DISTRIBUTING INFORMATION ON THE INTERNET -
Because content on its Web site is distributed to others, the
Company may be subject to claims for defamation, negligence or
copyright or trademark infringement or claims based on other
theories. These types of claims have been brought, sometimes
successfully, against Internet services in the past. The Company
could also be subject to claims based upon the content that is
accessible from its Web site through links to other web sites or
information on its Web site supplied by third parties. The Company's
insurance may not adequately protect against these types of claims.
Even to the extent such claims do not result in liability, the
Company could incur significant costs in investigating and
defending against such claims. The Company's potential liability for
information carried on or disseminated through its Web site could
require the Company to implement measures to reduce its
exposure to such liability, which may require the expenditure of
substantial resources and limit the attractiveness of the Company's
service to users.
THE NUMBER OF SHARES ELIGIBLE FOR PUBLIC SALE COULD
CAUSE THE COMPANY'S STOCK PRICE TO DECLINE. The market
price of the Company's common stock could decline as a result of
sales of a large number of shares of its common stock in the market
or the perception that such sales could occur. Such sales also might
make it more difficult to sell equity securities in the future at a
price that the Company deems appropriate.
THE LIQUIDITY OF THE COMPANY'S STOCK IS UNCERTAIN, AND IT
COULD BE DIFFICULT TO SELL YOUR SHARES - The Company
cannot predict if an active trading market in its common stock will
develop or how liquid that market might become.
THE MARKET PRICE OF THE COMPANY'S STOCK MAY BE
MATERIALLY ADVERSELY AFFECTED BY MARKET VOLATILITY - The
market prices of the securities of Internet-related companies have
been especially volatile and have experienced extreme volume
fluctuations. Volatility in the market price of the Company's stock
could lead to claims against the Company. If the Company were the
object of such litigation, it could result in substantial costs and a
diversion of the Company's management's attention and resources.
The trading price of the Company's common stock could be subject
to wide fluctuations in response to a
number of factors, including:
- the Company's quarterly results of operations;
- changes in earnings estimates by analysts and whether the
Company's earnings meet or exceed such estimates;
- announcements of technological innovations by the
Company's competitors;
- additions or departures of key personnel; - other matters
discussed elsewhere in this quarterly report and the Company's
other filings with the SEC; and
- other events or factors, which may be beyond the Company's
control.
THE COMPANY'S CONTROLLING STOCKHOLDERS MAY MAKE
DECISIONS WHICH YOU DO NOT CONSIDER TO BE IN YOUR BEST
INTEREST -These stockholders will be able to exercise control over
all matters requiring approval by the Company's stockholders,
including the election of directors and approval of significant
corporate transactions. This concentration of ownership may also
have the effect of delaying or preventing a change in control of the
Company.
31
POSSIBLE NEED FOR ADDITIONAL FINANCING -
There can be no assurance that the Company will not
require additional financing in the near future. There can
be no assurance that any additional financing will be
available to the Company on acceptable terms, or at all.
If adequate funds are not available, the Company may be
required to delay, scale back, or eliminate its research and
development or obtain funds through arrangement with
partners or others that may require the Company to
relinquish rights to certain technologies or potential
products or other assets. Accordingly, the inability to
obtain such financing could have a material adverse effect
on the Company's business, financial condition and
results of operations.
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.
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 products and services. In addition, such
markets are or likely will be subject to intense
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.
LIMITED PRIOR PUBLIC MARKET; POTENTIAL
LIMITED TRADING MARKET; POSSIBLE
VOLATILITY OF STOCK PRICE - There has only been
a limited public market for the securities and there can be
no assurance that an active trading market in the
Company's securities will be maintained. In addition, the
stock market in recent years has experienced extreme
price and small volume fluctuations that have a
particularly affected the market prices of many smaller
companies. The trading price of the common stock is
expected to be subject to significant fluctuations in
response to variations in quarterly operating results,
changes in analysts; earnings estimates, announcements
of technological innovations by the Company or its
competitors, general conditions in the medical device
industry and other factors. These fluctuations, as well as
general economic and market conditions, may have a
material or adverse effect on the market price of the
Company's common stock.
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.
32
LIMITED OPERATING HISTORY - The Company was
incorporated on June 17, 1998 and has commenced limited
operations. To date, the Company has attempted to
raise capital to fund the implementation of the initial
goals. There are approximately one half million dollars in
revenue, and the Company has negative shareholder
equity. The 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.
PUBLIC MARKET - 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.
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.
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, the
Company will have (i) severe cash flow and liquidity
problems, and (ii) may cease at that point to be a viable
commercial entity.
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.
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. David
Paul Wiebe is a Vice President of IPO Capital Corp. and will
receive a commission if and when he is able to place acquisitions.
33
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.
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.
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.
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 adverse foreign currency fluctuation. Such
fluctuations may also influence future contribution margins.
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.
34
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.
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.
THE MERGER WITH ONVANTAGE INC. MAY NOT COMPLETE - In the event that the
merger with onVantage Inc. does not complete, or does complete on terms
different than those currently contemplated, the share price of the Company
can be expected to be materially affected in a negative manner, and a
resulting substantial loss in shareholder value should be expected.
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.
35
Item 7 Financial Statements
ZSTAR ENTERPRISES, INC.
INDEX
PAGE
INDEPENDENT AUDITORS' REPORT F2
CONSOLIDATED BALANCE SHEETS F3
CONSOLIDATED STATEMENTS OF OPERATIONS F4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'EQUITY F5
CONSOLIDATED STATEMENTS OF CASH FLOWS F6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F7-13
COMMENTS BY AUDITOR FOR U.S. READERS ON
CANADA- U.S. REPORTING DIFFERENCE F14
F1 36
INDEPENDENT AUDITORS'REPORT
To the Shareholders
ZStar Enterprises, Inc.
We have audited the consolidated balance sheets of ZStar Enterprises, Inc.
as of February 29, 2000 and February 28, 1999, and the related consolidated
statements of operations, shareholders' equity and cash flows for the year
ended February 29, 2000 and the period June 17, 1999 (date of inception)
to February 28, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ZStar Enterprises, Inc.
as of February 29, 2000 and February 28, 1999, and the results of its
operations and its cash flows for the year ended February 29, 2000 and the
period June 17, 1998 to February 28, 1999 in conformity with generally
accepted accounting principles in Canada.
Bingham and Company
Chartered Accountant
Vancouver, British Columbia
May 4, 2000
F2 37
ZSTAR ENTERPRISES, INC.
Consolidated Balance Sheets
(in U.S. Dollars)
February 29, February 28,
2000 1999
ASSETS
Current Assets
Cash $165,597 $88,165
Accounts receivable 10,518 32,472
Prepaid expenses 4,644 6,595
Total Current Assets 180,759 127,232
Fixed assets- net (Note 3) 1,695 1,619
Goodwill
(net of accumulated amortization of
$7,432) 66,886 74,318
TOTAL ASSETS $249,340 $203,169
LIABILITIES AND SHAREHOLDERS'EQUITY
Current Liabilities
Accounts payable and accrued expenses $57,513 $110,308
Deposits 11,734 -
Notes payable shareholder (Note 4) 250,000 -
Note payable Apex Travel Ltd. (Note 4) - 50,000
Total Current Liabilities 319,247 160,308
Commitments and contingencies - -
Shareholders' Equity (Note 6)
Common stock, 30,000,000 shares authorized
$.001 par value; issued and outstanding
10,550,000 at February 29, 2000 and
February 28, 1999 10,550 10,550
Capital in excess of par value 242,950 222,950
Deficit (324,242) (190,639)
Accumulated comprehensive income 835 -
Total Shareholders' Equity (69,907) 42,861
TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $249,340 $203,169
See Notes to Financial Statements.
F3 38
ZSTAR ENTERPRISES, INC.
Consolidated Statements of Operations
(in U.S. Dollars)
Period June 17,
1998 (Date of
Year Ended Inception) to
February 29, February 28,
2000 1999
Sales revenues $579,849 $ -
Cost of sales 504,379 -
Gross profit 75,470 0
General and administrative expenses (Note 5) 209,073 190,639
Loss before (benefit) provision for taxes (133,603) (190,639)
(Benefit) provision for income taxes (Note 8) - -
Net (loss) (133,603) (190,639)
Other comprehensive income (Note 10) 835 -
Comprehensive income $(132,768) $(190,639)
Basic and diluted (loss) per share $(0.01) $(0.02)
Comprehensive income per share $(0.01) $(0.02)
Basic and diluted average shares outstanding 10,550,000 10,550,000
See Notes to Financial Statements.
F4 39
ZSTAR ENTERPRISES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Period June 17, 1998 (Date of Inception) to February 28, 1999
and the year ended February 29, 2000
Accumulated
Common Stock Capital in Compre-
($.001) Par Value Excess of hensive
Shares Amount Par Value Deficit Income Total
Sale of
common stock
to founders 1,500,000 $1,500 $ - $ - $ - $1,500
Sale of
common
stock 9,000,000 9,000 81,000 - - 90,000
Sale of
common
stock 50,000 50 149,950 - - 150,000
Share
issuance
expense - - (8,000) - - (8,000)
Net Income
(Loss) - - - (190,639) - (190,639)
Balance
February
28, 1999 10,550,000 10,550 222,950 (190,639) 0 42,861
Management
contribution
of services - - 20,000 - - 20,000
Net Income
(Loss) - - - (133,603) - (133,603)
Comprehensive
income
(Note 10) - - - - 835 835
Balance
February
29, 2000 10,550,000 $10,550 $242,950 $(324,242) $835 $(69,907)
See Notes to Financial Statements
F5 40
ZSTAR ENTERPRISES, INC.
Consolidated Statements of Cash Flows
(in U.S. Dollars)
Period June 17,
1998 (Date of
Year Ended Inception) to
February 29,February 28,
2000 1999
Operating Activities
Net (loss) $(133,603) $(190,639)
Adjustments to reconcile net income or (loss)
to net cash used by operating activities:
Depreciation and amortization 8,030 -
Management contribution of services with
no cash consideration 20,000 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 21,954 -
Decrease in prepaid expenses 1,951 -
Decrease in deposits 11,734 -
Increase (decrease) in accounts payable (52,795) 21,953
Net cash (used) by operating activities (122,729) (168,686)
Investing Activities
Purchase of fixed asset (674) -
Cash acquired on business acquisition - 23,351
Net cash provided (used)
by investing activities (674) 23,351
Financing Activities
Payment of promissory note (50,000) -
Promissory note payable 250,000 -
Cumulative foreign currency
translation adjustment 835 -
Sale of common stock,
net of stock issuance costs - 233,500
Net cash provided by financing activities 200,835 233,500
Increase (decrease) in cash 77,432 88,165
Cash at beginning of period 88,165 0
Cash at end of period $165,597 $88,165
Supplemental Disclosures of Cash Flow Information:
Cash paid during year for:
Interest $ $
Income taxes $ $
Supplemental Disclosures of Cash Flow Information
Non-cash investing and financing activities:
Issuance of note payable for
acquisition of Apex Canadian Holidays Ltd. $ - $50,000
See Notes to Financial Statements.
F6 41
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 1 - ORGANIZATION & OPERATIONS
ZStar Enterprises, Inc. (the "Company") was organized under the laws of the
State of Nevada on June 17, 1998. The Company provides internet-based hotel
discounting services.
On February 28, 1999 the Company acquired all of the issued and outstanding
shares of stock of Apex Canadian Holidays Ltd., a British Columbia, Canada,
corporation ("Apex"). Apex operates as a wholesaler and seller of hotel
accomodations and land tour operator.
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Accounting
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Apex Canadian Holidays Ltd. All significant
intercompany accounts and transactions have been eliminated.
b. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
which affect the reported amounts of assets and liabilities as at the date of
the financial statements and revenues and expenses for the period reported.
Actual results may differ from these estimates.
C. Financial Instruments
The fair values of the financial instruments approximate their carrying value.
d. Fixed Assets
Fixed assets are recorded at cost and depreciated over their estimated useful
lives at the following annual rates and methods:
Computer 30% declining balance
Furniture and equipment 20% declining balance
e. Goodwill
Goodwill is recorded at cost and amortized on a straight-line basis over 10
years.
F7 42
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f. Foreiqn Exchange Translation
The Company translates the accounts of its self-sustaining foreign
subsidiaries using the current rate method. Under this method, assets and
liabilities are translated at the rate of exchange in effect at the balance
sheet date. Revenue and expense items are translated at the rate of exchange
in effect on the dates on which items are recognized in income during the
period. Translation adjustments arising from changes in exchange rates will
be recorded as a foreign currency translation adjustment in shareholders'
equity. These adjustments are not reflected in income until realized through a
reduction in the Company's net investment in such operations.
g. Revenue Recognition
A subsidiary of the Company operates as a wholesaler and reseller of hotel
accommodations and land tour operator. The subsidiary is responsible for
collection of the amounts due from customers and for payment to the supplier.
Revenue is recognized at the time that the transaction is confirmed.
h. Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentration of
credit risk consist of cash deposits.
Cash balances are held principally at one financial institution and may, at
times, exceed insurable amounts. The Company believes it mitigates its risk
by investing in or through major financial institutions. Recoverability is
dependent upon the performance of the institution.
i. Income Taxes
The Company applies the policies of Statement of Financial Accounting
Standards No. 109, Accounting for Income taxes, which requires use of the
asset and liability method of accounting for income taxes. Under this method,
deferred taxes are recognized for the tax consequences of temporary differences
by applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities.
F8 43
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j. Earnings (Loss) Per Share
The Company reports earnings (loss) per share in accordance with SFAS No. 128,
"Earnings Per Share", which requires the reporting of both basic and diluted
earnings per share. Net income (loss) per share-basic is computed by dividing
income available to common shareholders by the weighted average number of
common shares outstanding for the period. Because the Company has no common
stock equivalents, no difference exists between basic and diluted earnings per
share.
k. Comprehensive Income
Comprehensive income is the total of (1) net income plus (2) all other changes
in net assets arising from non-owner sources. The Company has presented a
statement of operations that includes other comprehensive income.
Note 3- FIXED ASSETS
February 29, February 28,
2000 1999
Computer $3,177 $2,503
Furniture and equipment 805 805
3,982 3,308
Less accumulated depreciation (2,287) (1,689)
$1,695 $1,619
Note 4- SHORT TERM BORROWINGS
Short term borrowings consisted
of the following: February 29, February 28,
2000 1999
Note payable shareholder $250,000 $ -
Note payable Apex Travel Ltd. $ - $50,000
On August 17, 1999 and February 23, 2000 the Company borrowed $100,000 and
$150,000, respectively, from a shareholder of the Company.
The notes bear interest at eight percent (8%) per annum and are payable on
demand. The promissory notes are secured by a general security interest in all
assets of the Company.
The note payable to Apex Travel Ltd. was for the acquisition of Apex Canadian
Holidays Ltd. on February 28, 1999 and was paid on April 28, 1999.
F9 44
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 5- RELATED PARTY TRANSACTIONS AND MANAGEMENT SERVICES
Joist Management Ltd. is related by management contract to provide
administrative and general office services to the Company. None of the
shareholders, officer or directors of Joist Management Ltd, are shareholders
of ZStar Enterprises, Inc. The Company paid management fees of $75,000 to
Joist Management Ltd. for the year 1999- $80,000 on a month to month basis.
The Company does not have a compensation plan for its officers and directors.
An estimate of the fair value of management services of $20,000 has been
provided in these financial statements to reflect the value of management
contributions to the Company during the withdrawal of Joist Management Ltd.
for the period from March 1 to June 30, 1999.
Note 6- SHAREHOLDERS' EQUITY
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).
In October 1998 the company issued 50,000 common shares for a cash
consideration of $150,000 ($3.00 per share) and incurred $8,000 of offering
expenses.
Note 7- BUSINESS ACQUISITION
On February 28, 1999, the Company acquired 100% of the outstanding common
shares of Apex Canadian Holidays Ltd. from Apex Travel Ltd. The Company
signed a promissory note in the amount of $50,000 as full consideration for
the purchase. The promissory note was paid in full on April 28, 1999. As a
result of this acquisition, Apex Travel Ltd., is no longer related to Apex
Canadian Holidays Ltd. The investment in Apex Canadian Holidays Ltd. has been
accounted for using the purchase method.
The investment in Apex Canadian Holidays Ltd. exceeded the book value of the
net assets by $74,318. This excess has been allocated to goodwill and is
being amortized over a ten year period.
F10 45
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 8- INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
Year ended:
February 29, February 28,
2000 1999
Current:
Federal tax expense $(41,000) $(59,000)
State tax expense (12,000) (17,000)
Deferred:
Federal tax expense 41,000 59,000
State tax expense 12,000 17,000
$ - $ -
A reconciliation of differences between the statutory U.S. federal income tax
rate and the Company's effective tax rate follows:
Year ended:
February 29, February 28,
2000 1999
Statutory federal income tax 34% 34%
State income tax- net of
federal benefit 5% 5%
Valuation allowance -39% -39%
0% 0%
The components of deferred tax assets and liabilities were as follows (in
thousands):
Year ended:
February 29, February 28,
2000 1999
Deferred tax assets:
Net operating loss carryforwards $129,000 $76,000
Total deferred tax assets 129,000 76,000
Valuation allowance (129,000) (76,000)
Net deferred tax assets $ - $ -
SFAS No. 109 requires a valuation allowance to be recorded when it is more
likely than not that some or all of the deferred tax assets will not be
realized.
The Company recognized losses for the periods ended February 29, 2000 and
February 28, 1999. The amount of net operating loss carryforwards are
approximately $133,000 and $190,000. The net operating loss carryforwards,
if not utilized, will expire in the years 2006 through 2007.
F11 46
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 9- GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. Without realization of additional capital, it would be unlikely for
the company to continue as a going concern. Management's plan in this regard
encompasses the February 28, 1999 purchase of Apex Canadian Holidays Ltd. As
a result of this purchase, the Company now has continuing operations which
are expected by management to provide funding for working capital and purchase
requirements based on management's projections. In addition, the Company has
received $250,000 of additional funding through a debt financing. The
operating expenses of ZStar Enterprises, Inc. are expected to be lower with
the reduction of startup costs associated with legal, accounting and consulting.
Note 10- COMPREHENSIVE INCOME
Accumulated other comprehensive income consists of the following:
February 29, February 28,
2000 1999
Foreign currency translation adjustment $835 $ -
A summary of the component of other comprehensive income for the year ended
February 29, 2000 is as follows:
Before-Tax Income After-Tax
Amount Tax Amount
Net foreign currency translation
adjustment $835 $ - $835
Other comprehensive income $835 $ - $835
Note 11 - COMMITMENTS AND CONTINGENCIES
Office Leases
The Company's office space is provided on a month to month basis by its
management company and is included in its management fee.
Apex Canadian Holidays Ltd. rents office space on a month to month basis
from Apex Travel Ltd. Rent expense was $6,644 for the year ending February 29,
2000.
F12 47
ZSTAR ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000
Note 12- 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.
Any changes to the Company's financial statements as a result of an accounting
pronouncement issued but not yet adopted by the Company are immaterial.
Note 13- UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
The year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information
using year 2000 dates is processed. In addition, similar problems may arise
in some systems that use certain dates in 1999 to represent something other
than a date. Although the change in date has occurred, it is not possible to
conclude that all aspects of the year 2000 Issue that may affect the Company,
including those related to customers, suppliers, or other third parties, have
been fully resolved.
F13 48
COMMENTS BY AUDITOR FOR U.S. READERS ON
CANADA - U.S. REPORTING DIFFERENCE
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 9 to the financial statements. Our report to
the shareholders dated May 4, 2000 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 they are adequately disclosed in the
financial statements.
Vancouver, British Columbia
May 4, 2000 Chartered Accountant
F14 49
Consent of Independent Chartered Accountant
We hereby consent to the use in this filing statement on Form 1O-KSB of our
report dated May 4, 2000, relating to the financial statements of ZStar
Enterprises, Inc. as at February 29, 2000.
Vancouver, British Columbia Chartered Accountant
50
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance With Section 16(a) of the Exchange
Act
DIRECTORS AND OFFICERS
ERIC NEIL WHITE, a businessman, age 47, residing at
13371 21A Avenue, Surrey, British Columbia, Canada V4A 9N1.
Mr. White is the President, Chief Executive Officer and a Director
of the Company. Currently, he is a partner at Chancellor Partners.
He has also been a partner at Chowne, Beatson, White & Hoogstra,
and Corporate Recruiters, Ltd. He was the Director of Personnel
for Expo 86 Corporation, and has worked as a Management Consultant
for Touche Ross & Partners. He graduated with honors from
St. Thomas University in New Brunswick, Canada.
DAVID PAUL WIEBE, is a businessman, age 38, and residing at
at 1401 Farrell Avenue, Delta, British Columbia, Canada V4L 1V3.
Mr. Wiebe is a Director of the Company. Mr. Wiebe is a Vice President,
Corporate Finance for IPO Capital Corp., a Canadian investment dealer.
Mr. Wiebe focuses his efforts on structuring financings for micro-cap
public and private technology companies. In addition to his six years in
investment banking, he gained a wide range of experience as an
independent business consultant. He started his career in sales with
Nestle. Mr. Wiebe received his B.A. in Economics in 1985 and his M.B.A.
in 1989 both from the University of British Columbia. He obtained his
CFA charter in 1998. He was appointed to the Board of Directors of the
Company on February 25, 2000.
SHELLEY JAMES, a businesswoman, age 40, was 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. She resigned from the Board of Directors on January 28, 2000.
51
CHUI KEUNG HO, a businessman, age 39, was 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. Mr. Ho resigned as a Director, President and Chief
Executive Officer of the Company on February 28, 2000.
ROSS WILMOT served briefly as a Director, treasurer, secretary
and chief financial officer of the Company. His address in 13548 19th
Avenue, Surrey, B.C. Canada V4A 6B4 He was appointed as Director,
Secretary, Treasurer, and Chief Financial Officer on January 28, 2000
and resigned on March 15, 2000.
Item 10 Executive Compensation
There has been no compensation provided to the executive
officers, including Paul Wiebe, Chui Keung Ho, Eric White, Ross Wilmot
and Shelley James.
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 of the
Company 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 for its fiscal year ending February
29, 2000. The Company is considering a private placement for up to
$7.5 million through IPO Capital Corp., where David Paul Wiebe is
a Vice President.
- The Company is not a party to any employment or consulting
agreements between the Company and any 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, including Mr. Wiebe, a
a director of the Company, 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.
There are no option/SAR grants in last fiscal year for any
executives. Nor are there any aggregated option/SAR exercises in last
fiscal year and option/SAR values. There are no long-term incentive
plans (LTIP)- awards in last fiscal year.
52
Item 11 Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of the Record Date, with
respect to: (i) each current director and each currently serving Executive
Officer (as defined below) of the Company; (ii) all current directors and
Executive Officers of the Company as a group; and (iii) each current
beneficial owner of five percent or more of Common Stock.
Name & Address Amount & Nature of Percentage
Beneficial Ownership
Bob Thast1
8231 Dalemore Road
Richmond, BC V7C 2A5 519,350 Common Stock 4.92%
Sheri Thast2
8231 Dalemore Road
Richmond, BC V7C 2A5 252,000 Common Stock 2.39%
George Dengin3
4378 Ross Crescent
West Vancouver, BC V7W 1B2 500,000 Common Stock 4.74%
Wendy Dengin
4378 Ross Crescent
West Vancouver, BC V7W 1B2 500,000 Common Stock 4.74%
Dengin Family Trust4
4378 Ross Crescent
West Vancouver, BC V7W 1B2 20,150 Common Stock 0.19%
Janette Pantry5
1401 Farrell Avenue
Delta, BC Z4L 1V3 20,000 Common Stock 0.19%
Eric Neil White6
13371 21A Avenue
Surrey, BC V4A 9N1 10,000 Common Stock 0.9%
David Paul Wiebe
595 Burrard Street, Suite 3000
Vancouver, B.C. V7X 1L4 0 0.00%
All Current Directors & Officers
as a Group (2 Persons) 7 30,000 Common Stock 0.28%
Notes:
1. Bob Thast holds shares through Thast Projects, Inc.
2. Bob Thast and Sheri Thast are husband and wife.
3. George Dengin and Wendy Dengin are husband and wife.
4. Dengin Family Trust controlled by George Dengin and
Wendy Dengin.
5. Jannette Pantry is the fiancee of David Paul Wiebe, a
current Director of the Company.
6. Shares held through Eric White Holdings, Ltd.
7. Includes shares held by Jannette Pantry, fiancee to David
Paul Wiebe.
53
Item 12 Certain Relationships and Related Transactions
None of the Officers and Directors of the Company receive any form of
compensation, except that IPO Capital Corp., ("the Agent") where
Mr. David Paul Wiebe serves as Vice-President, shall receive Agent's
Warrants for services rendered in the private placement offering. As part
of the fee structure to the Placement Agent, Zstar will issue warrants
to the Placement Agent ("Agent's Warrants") in an amount equal to 10%
of the equity securities (or equivalent) sold in the Offering. Each Agent's
Warrant will entitle the Agent to acquire one common share of the Company at
the Offering Price within one year of the closing of the Merger Agreement and
at 125% of the Offering Price for the following year. The fee to the Placement
Agent for the Offering will also include 10% (in cash or common shares
at the Agent's discretion) of the gross proceeds raised, as well as a
corporate finance fee of $37,500 ($18,750 at each of the First and
Second Traunches), payable in cash or common shares at the Placement
Agent's discretion.
Item 13 Exhibits and Reports from Form 8K
No Form 8K Reports were filed from the Quarter Ending May
31, 1999 to the Fiscal Year ending February 29, 2000.
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; Web
Development and Hosting Agreement dated October 15, 1998
Joist Management Contract Agreement dated July 1, 1999
Exhibit 11 Statement re: computation per share earnings is stated
elsewhere in this Filing
Exhibit 21 Subsidiaries of small business issuer
Exhibit 27 Financial data schedule
Exhibit 99 Securities Purchase Agreement with Apex Travel Ltd.
dated as of February 28, 1999
Audited Financial Statements of Apex
8/17/99 Promissory Note for $100,000 by shareholder
2/23/00 Promissory Note for $100,000 by shareholder
Auditor confirming bank deposit of $100,000 (Loan from
shareholder)
Consummation of Stock Purchase Agreement
54
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/ Eric Neil White, President
------------------------------------
Eric Neil White, President
/s/ David Paul Wiebe, Director
------------------------------------
David Paul Wiebe, Director
Date: June 1, 2000
55
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.
56
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 personwho 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
57
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
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
58
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 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 businessto 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.
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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 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.
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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 ate 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 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.
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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 ommittee,(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.
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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 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.
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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.
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.
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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 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.
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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.
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.
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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. 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.
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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 advancethe 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.
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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
69
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
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:
70
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)
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
capitalstock 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
71
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.
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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 "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.
73
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 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.
74
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;
75
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;
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.
76
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.
77
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
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.
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.
78
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 agree-
ments 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.
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 orunenforceability 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.
79
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)
_____ A Married (Man) (Woman) as (His) (Her) Separate Property
80
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
___________________________ ___________________________
Mailing Address, if different Country
81
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
____________________
82
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.
83
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:
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.
84
[LETTERHEAD]
LYNX
INTERNET AND MARKETING
Page 1 of 2
WEB DEVELOPMENT AND HOSTING AGREEMENT
Oct 15, 1998
Zstar Enterprises Inc.
4323 West 12th Avenue
Vancouver, BC V6R 2P9
TERMS & CONDITIONS OF PROPOSED PROJECT - APEX HOLIDAYS
1. Applicable taxes upon invoicing. All prices are subject to change.
2. 50% of total project sum as deposit is required for the job to proceed.
Remaining balance is required prior to job completion. Please make cheque
payable to "LYNX INTERNET.
3. All deposits are non-refundable.
4. Client is responsible for payments charge by the InterNIC. (InterNIC, the
US Domain Authority, will invoice your organization separately for the
annual fee for domain name maintenance of US$35 per year (ongoing). They
collect the first two years payment, US$70, in advance. There are no other
costs or charges to reserve your domain.)
5. Under no circumstances, shall LYNX INTERNET be liable for any direct,
indirect lost or damages from any interruptions, lost of contents, email or
files deletion, errors, viruses or lost of data, whether or not limited to
acts of God, communications/hardware/equipment failure, theft, destruction
or unauthorized access to LYNX INTERNET's facilities.
6. All custom programs that Lynx developed are owned by Lynx Internet. No
alternation or modification is allowed without Lynx's permission.
7. Lynx reserved the right to terminate the right to use our programs. Such
circumstances may include termination of contract, network abuse.
8. All prices quoted in this proposal valid for 30 days since the proposal
preparation date.
9. By signing the contract, the client agrees to the terms and conditions
mentioned above and the "Policy Agreement for Internet Users" below.
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POLICY AGREEMENT FOR INTERNET USERS
I. User Accounts
1. User accounts on LYNX INTERNET arc to be used by the person in whose name
the account created. Business accounts are to be used only by the members
of the group or organization named by the account Exceptions will only be
accepted with the authorization by LYNX INTERNET.
2. All accounts are granted subject to compliance with this policy statement.
3. The Administration of LYNX INTERNET reserves the right to remove any
account from this system without giving notice of intention to do so. Any
account balance will be refunded according to the guidelines m item 4
below.
4. Full or partial refunds may be requested subjected to the following
circumstances: "account holder has not successfully make use of the LYNX
INTERNET account within a period of five (5) working days (must be verified
by our technical staff).
5. No refunds are given with reasons other then the above circumstances
mentioned at section 4.
6. All account termination must be confirmed with a written confirmation from
the account holder, with full account information including login name,
password, and account holder's address. Confirmation letter must be
received by LYNX INTERNET before the due date of the account via fax, mail,
or email format.
7. Any bank charges incurred by LYNX INTERNET because of NSF cheques or
similar circumstances will be charged back to the member's account along
with a service charge of $25.
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II. Unauthorized Use of Facilities
1. LYNX network system may not be used to harass any member, non-member, or
system operator.
2. No member of this system shall use the system to encourage facilitate, or
engage illegal activities.
3. Members shall make use of LYNX INTERNET services in a manner which will not
interfere with reasonable use by other members.
4. Line Camping - When a user has established a dialup connection to our
network but is not performing any meaningful activity, they are classified
as `camping out" and is not permitted. This applies to all business and
personal accounts. Every user is expected to make very effort to read
messages offline, LYNX INTERNET has the right to determine on it's own
whether a user is camping out on the lines. Accounts found guilty of line
camping out will be immediately suspended without notice, and without
refund.
5. Account Sharing and Multiple Logins Account sharing is when two or more
users share either a personal or business account. Multiple logins are when
two or more users arc logged into an account simultaneously. Users are
responsible for maintaining the secrecy of their passwords. If a user
suspects that someone may know his/her password, he/she should change the
password immediately and notify.
6. LYNX INTERNET. Once LYNX INTERNET detects there arc users sharing their
account or multiple logins, these accounts will be suspended without notice
and without refund.
WITHOUT LIMITING THE GENERALITY OF THE ABOVE, THE FOLLOWING ARE SAME
EXAMPLES OF THE UNAUTHORIZED USE OF FACILITIES
87
1. Attempting to circumvent security systems on any facility, or the use of a
computer account without authorization;
2. Developing or using programs that harass other users of the Facilities or
that damage the software or hardware components of the Facility and placing
any destructive or nuisance programs such as a virus in the Facilities;
3 Using the Facilities, particularly electronic mail and bulletin boards to
send fraudulent, harassing or obscene messages;
4. Transmitting commercial or personal advertisements, solicitations or
promotions using the Facilities:
5. Unless authorized by the Administration, reading, obtaining copies of or
modifying data files, programs or passwords belonging to other computer
users without the permission of those other computer users;
6. Breaching the terms and conditions of a software licensing agreement to
which LYNX INTERNET is a party.
III. Penalties
1. Persons found to have used the Facilities for unauthorized use or who have
misused the Facilities are subject to legal action in accordance with
applicable policies and collective agreements.
2. Failure to comply with these guidelines may result in account termination.
IV. Changes In This Policy
This policy statement is subject to change without notice.
/s/ Elaine Hsu
Project Manager
Lynx Internet & Marketing
/s/ Chui Keung Ho
President
Zstar Enterprises Inc.
88
MANAGEMENT AGREEMENT
THIS AGREEMENT made effective July 1, 1999.
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:
The Corporation requires the services of an
administrator/manager to fulfill the day-to-day responsibilities
imposed on the Corporation; and
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 July 1, 1999, 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:
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;
89
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 of 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 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 with an early contract termination
payout of $25,000.
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/ /s/
Joist Management Ltd. Zstar Enterprises, Inc.
90
EXHIBIT 21
Apex Canadian Holidays Ltd., a British Columbia, Canada corporation is a
wholly-owned subsidiary of the Company.
Apex Canadian Holidays Ltd. also does business under the name "Apex."
EXHIBIT 27
