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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ANYTHING INTERNET CORPORATION
---------------------------------------------
(Name OF Small Business Issuer in its Charter)
COLORADO 5961 84-1425882
---------------------- ---------------------- ----------------------
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industry Identification Number)
organization) Classification Code
Number)
3020 NORTH EL PASO, SUITE 103
COLORADO SPRINGS, CO 80907
719-227-1903
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(Address and Telephone Number of Principal Executive offices)
J. SCOTT SITRA
3020 NORTH EL PASO, SUITE 103
COLORADO SPRINGS, CO 80907
719-227-1903 EXT. 102
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(Name, Address and Telephone Number of Agent for Service)
Copies of all Communications to:
WILLIAM M. ZIERING, ESQ.
FOUR EMBARCADERO CENTER, SUITE 3400
SAN FRANCISCO, CA 94111-4187
TELEPHONE: 415-956-0161
FACSIMILE: 415-398-3249
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practical after this Registration Statement becomes effective and the Warrants
representing the Common Stock being registered herein are exercised.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act please
check the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Each Maximum Maximum
Class of Offering Aggregate Amount of
Securities to Amount to be Price per Offering Registration
be Registered Registered Share(1) Price(1) Fee
- --------------------------------------------------------------------------------
Common Stock,
no par value,
underlying
Outstanding
Warrants 200,000 $ 3.00 $ 600,000 $ 166.80
- --------------------------------------------------------------------------------
Total $ 166.80
<FN>
(1) The maximum offering price per share of the Common Stock has been
calculated pursuant to Rule 457(g).
</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER
AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES
ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS
THE SECURITIES AND EXCHANGE COMMISSION ("COMMISSION"), ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
EXPLANATORY NOTE
We are registering the Common Stock to comply with contractual obligations
arising under issued and outstanding stock purchase warrants. We are
registering these shares of Common Stock so that these investors may sell from
time to time in the public market, should one develop, any Common Stock they
acquire upon the exercise of their Warrants. We refer to these investors as
"selling stockholders" in this registration statement and will receive no
proceeds from the sale of these shares by such stockholders other than the
amounts received from them exercising their Warrants into shares of Common
Stock. There will be no general offering of shares to the public. Therefore,
no underwriter is being used.
PART I
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FRONT OF REGISTRATION STATEMENT AND OUTSIDE FRONT COVER PAGE OF PROSPECTUS.
ANYTHING INTERNET CORPORATION
[ANYTHING INTERNET LOGO]
PROSPECTUS
200,000 Shares of Common Stock
This prospectus relates to the offering by certain stockholders of Anything
Internet Corporation of 200,000 shares of our common stock. The selling
stockholders are identified under the heading "Selling Stockholders" later in
this prospectus. We will not receive any proceeds from sales of the common
stock. The common stock is currently not traded, but an application is pending
to obtain a listing on the OTC Bulletin Board under the proposed symbol "ANYI."
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The stockholders may sell, if a market ever develops, the common stock from time
to time in transactions on the OTC Bulletin Board, in negotiated transactions,
or a combination of such selling methods, at fixed prices that may be changed,
at market prices prevailing at the time of sale, at prices related to prevailing
market prices, or at negotiated prices. The stockholders may sell the common
stock to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders and/or the purchasers of the common stock for whom the
broker-dealers may act as agent or to whom they may sell as principal, or both.
The selling stockholders may pay brokerage fees or commissions in connection
with the sales of the common stock.
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD INVEST
IN THE COMMON STOCK ONLY IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT. SEE
"RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Selling Shareholders Underwriting
Discount (1) Proceeds to
Company (2)
Per Share $3.00 -0- $3.00
Total $600,000 -0- $600,000
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(1) No underwriters are being used to conduct this offering.
(2) Before deducting expenses estimated at $26,667.
April [insert], 1999.
INSIDE FRONT AND OUTSIDE BACK COVER PAGES OF PROSPECTUS.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary 3
Risk Factors 5
Use of Proceeds 16
Determination of Offering Price 16
Dividend Policy 16
Capitalization 16
Dilution 17
Selected Financial
Information 18
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Management's Discussion and
Analysis of Financial
Condition and Results of
Operations 19
Business 21
Management 32
Executive Compensation 34
Certain Transactions 34
Principal Stockholders 35
Description of Securities 36
Shares Eligible For Future
Sale 38
Legal Matters 38
Experts 40
Additional Information 40
Index to Financial
Statements F-1
No dealer, salesperson or any other individual has been authorized to give
any information or make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus does not constitute and offer to sell, or a
solicitation of any offer to buy, the Common Stock in any jurisdiction where, or
to any person to whom, it is unlawful to make such an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create an implication that there has not been any change in
the facts set forth in this Prospectus or in the affairs of the Company since
the date hereof.
Until [insert], 1999, (30 days from the date of this Prospectus) all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
RISK FACTORS
YOU SHOULD READ THE FOLLOWING RISK FACTORS CAREFULLY BEFORE PURCHASING OUR
COMMON STOCK. THIS REGISTRATION STATEMENT AND ACCOMPANYING PROSPECTUS CONTAIN
CERTAIN FORWARD-LOOKING STATEMENTS BASED ON CURRENT EXPECTATIONS THAT INVOLVE
RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS,
INCLUDING THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS REGISTRATION
STATEMENT AND ACCOMPANYING PROSPECTUS. ADDITIONAL RISKS AND UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR
BUSINESS OPERATIONS. IF ANY OF THESE RISKS ACTUALLY OCCUR, OUR BUSINESS,
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FINANCIAL CONDITION OR OPERATING RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED.
IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK, IF A MARKET EVER DEVELOPS,
COULD DECLINE AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT. THE CAUTIONARY
STATEMENTS MADE IN THIS REGISTRATION STATEMENT AND ACCOMPANYING PROSPECTUS
SHOULD BE READ AS BEING APPLICABLE TO ALL FORWARD-LOOKING STATEMENTS WHEREVER
THEY APPEAR IN THIS REGISTRATION STATEMENT AND ACCOMPANYING PROSPECTUS.
DEVELOPMENT-STAGE COMPANY; LIMITED OPERATING HISTORY.
We founded our company in the state of Colorado on August 15, 1997, and
opened our first Internet storefront in December 1997. Accordingly, we have a
limited operating history upon which you can evaluate our business and future
prospects. In order to be successful, we must attract more traffic to our
existing and future Internet storefronts. However, as a developmental stage
company in a new and rapidly evolving market like the Internet, we face numerous
risks and uncertainties. Some of these risks and uncertainties relate to our
ability to:
- - develop further our existing Internet storefronts: www.anythingpc.com,
www.anythingmac.com and www.anythingunix.com;
- - build brand awareness for Anything Internet and its various Internet
storefronts;
- - diversify ourselves into other areas of e-commerce to minimize our
exposure and associated risks;
- - attract a larger audience to, and increase the frequency of use of, our
existing and future Internet storefronts;
- - increase customer acceptance of making online purchases;
- - generate increased revenues through our Internet storefronts from
consumers, businesses and individual vendors;
- - maintain and develop strong relationships with suppliers, distributors and
manufacturers;
- - generate increased revenues from advertisers;
- - respond and stay ahead of the actions of our competitors;
- - manage and capitalize upon our high growth rates;
- - increase our business-to-business sales force and relationships;
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- - develop and implement various advertising and marketing strategies;
- - develop and maintain strategic partnerships;
- - develop, motivate and retain qualified personnel;
- - provide unique content to attract repeat visitors to our Internet
storefronts;
- - continue to upgrade and enhance our technologies and transaction
capabilities to accommodate better service and higher volumes of daily
visitors to our Internet storefronts;
- - provide exceptional customer service and order fulfillment;
- - successfully integrate acquired businesses and Internet storefronts,
technologies and services; and
- - develop unique Internet storefronts and e-commerce technologies to secure
long-term growth and profitability.
LIMITED CAPITAL; NEED FOR ADDITIONAL FUNDING.
We currently anticipate that the net proceeds from the exercise of the
outstanding Warrants into the shares of Common Stock being registered in this
registration statement, together with funds, existing credit facilities and cash
flow from ongoing operations, will be sufficient to meet our anticipated working
capital needs for the next 12 months. However, in order to better enable us to
pursue our aggressive acquisition and expansion plans, we anticipate needing to
raise additional working and expansion capital. To accomplish this, while
satisfying our long-term capital needs, we anticipate conducting a secondary
equity and/or debt offering sometime in the Fall of 1999 to raise between $20
and $50 million in new working and expansion capital, should market conditions
remain favorable.
Because of the speculative and unproven nature of our business, we cannot
assure you that any required additional financing will be available on terms
favorable to us, if at all. If additional funds are raised by our issuing
equity securities, stockholders may experience dilution of their ownership
interest and such securities may have rights senior to those of the holders of
our Common Stock. If additional funds are raised by issuing debt, we may be
subject to certain limitations on our operations, including the limitations on
the payment of possible future dividends. If adequate funds are not available
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or are not available on acceptable terms, we may be unable to fund our
expansion, successfully promote our brand, take advantage of acquisition
opportunities, develop and enhance our services and Internet storefronts or
respond to competitive and business pressures, which could have a material
adverse effect on our business, results of operations and financial condition.
UNPREDICTABILITY OF FUTURE OPERATING RESULTS; SEASONALITY.
Our ability to generate significant revenues, and ultimately profits, is
uncertain. We have a limited operating history and are operating within a
rapidly evolving emerging market. Therefore, we may not be able to accurately
predict future revenues or profits, if any.
At the moment the majority of our revenue comes from the sale of computer
hardware, software and peripheral products. Consumer and business buying
patterns are often substantially affected by new product releases.
Historically, such releases tend to maintain or increase consumer and business
spending. Therefore, a lack of or delay in new product releases could
negatively impact our revenues and prevent us from generating a profit.
Our current and future expense levels are based largely on our investment
plans and internal estimates of future revenues. Our sales and operating
results generally depend on the volume of, timing of, and ability to fulfill our
customers' orders. Forecasting these trends is a very difficult task. We may
be unable to adjust our spending in a timely manner to compensate for any
unexpected shortfalls in revenue. If we ever experience a significant revenue
shortfall in relation to our planned expenditures it could materially affect our
business, results of operations and financial condition. Furthermore, to
respond to changes in competition, we may need to make certain unforeseen
pricing, service or marketing decisions. The consequences of those decisions
could also materially affect our business, results of operations and financial
conditions.
In additional to everything else, we may also experience seasonal
fluctuations in our business. Historically seasonal fluctuations in the
computer industry and Internet that might affect our business include:
- - Internet and commercial online service usage, which may decline during the
summer months;
- - traditional consumer, business and government seasonal spending patterns;
and
- - advertising expenditures.
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If we ever experience seasonal fluctuations in our business, they may cause
unexpected quarterly variations in our operating results which could materially
affect our business, results of operations and financial conditions.
COMPETITION.
The Internet e-commerce market is a new, rapidly evolving and intensely
competitive marketplace. We expect competition to intensify even more in the
future. Barriers to opening a new Internet storefront are rising, but remain
minimal for such a true global reach. According to International Data Group, it
now requires an investment of about $6 million to create a new Internet
storefront, and about $13 million annually to maintain and promote it.
Through our wholly owned subsidiary, AnythingPC Internet Corporation, we
primarily compete directly in the computer products retail industry, which, as a
whole, is an intensely competitive marketplace. In this arena we currently
compete primarily with a variety of companies, including:
- - traditional computer retailers, including CompUSA and Fry's Electronics;
- - mail-order retailers, including CDW, MicroWarehouse, Insight, PC
Connection and Creative Computers;
- - Internet-only computer retailers including Egghead.com, Beyond.com,
Cyberian Outpost and Buy.com;
- - manufacturers that sell directly over the Internet including Dell, Gateway
and Apple;
- - a number of online service providers, including America Online and
Microsoft Network that offer computer products directly or in
partnership(s) with other retailers;
- - some non-computer retailers such as Wal*Mart that sells a limited
selection of computer products via the Internet; and
- - computer products distributors that may develop direct channels to the
consumer market.
If competition increases from these and other sources, we might have to
respond to competitive pressures by implementing pricing, marketing and other
programs, or seeking out additional strategic alliances or acquisitions, that
may be less favorable than would otherwise be established or obtained. Any such
response to competitive pressures could materially affect our business, results
of operations and financial conditions.
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We believe that the principal competitive factors in Internet e-commerce
are brand recognition, selection, convenience, price, speed and accessibility,
customer service, quality of site content, and reliability and speed of
fulfillment. We also believe that the large enterprise market focuses on
compatibility of products, administration and reporting, single source supply,
security and cost-effective deployment. Many of our current and potential
competitors have longer operating histories, larger customer bases, greater
brand recognition, and significantly greater financial, marketing and other
resources. In addition, larger, well-established and well-financed entities may
acquire, invest in, or form joint ventures with our competitors as the Internet
and e-commerce in general become more widely accepted.
We are already aware that some of our competitors have and may continue to
adopt aggressive pricing and inventory availability policies, and can devote
substantially more resources to the continual development of their Internet
storefronts. The results of this increased competition may lower our
operating margins, cause us to lose market share, and diminish our brand. We
are also aware of the fact that some companies controlling access to Internet
e-commerce transactions through network access or Web browsers currently
promote, and will likely continue to promote, a variety of our competitors. We
may also experience new competitive pressures from the emergence of new
technologies and the expansion of existing technologies. Any one of these
competitive pressures could materially affect our business, results of
operations and financial conditions.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL.
Our future success depends, in part, on the continued services of our
senior management, particularly J. Scott Sitra, our President and Chief
Executive Officer, and Robert C. Schick, President and Chief Executive Officer
of our wholly-owned subsidiary, AnythingPC Internet Corporation. Our future
success also depends upon our ability to retain and motivate key employees. The
loss of the services of Mr. Sitra, Mr. Schick or any other key employees would
have a material adverse effect on our business, results of operations and
financial condition. We currently maintain key person insurance on Mr. Schick
through The New England that will provide us with $10,000 a month for up to 24
months should Mr. Schick become incapacitated in any way. We are exploring
similar key person insurance policies for Mr. Sitra. None of our officers or
key persons are bound by employment agreements. Therefore, our relationships
with any of these officers and key employees can be terminated at any time.
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Our future success also depends on our ability to identify, attract, hire,
train, retain and motivate highly skilled technical, managerial, merchandising,
marketing and customer service personnel. Competition for such personnel is
intense and we cannot be assured that we will be able to successfully attract,
assimilate or retail sufficiently qualified personnel. Our inability to do so
could have a material adverse effect on our business, results of operations and
financial condition. Over the next twelve months we intend to hire a qualified
Chief Financial Officer, as well as a full-time graphics artist, a full-time web
master, additional part-time customer support personnel and part-time shipping
and warehousing personnel. If all of these positions can successfully be
filled, we anticipate an annual increase in payroll expenses of approximately
$160,000.
RISK OF INADEQUATE INSURANCE COVERAGE AND DISASTER RECOVERY PLANS.
Our operations and computer and communications hardware systems are
vulnerable to damage or interruption from fire, flood, power loss,
telecommunications failure, break-ins, earthquake and other similar events. We
maintain mirrored communications sites in San Diego, California and Colorado
Springs, Colorado with plans to add a third such mirrored site, but cannot be
certain that, if one site were to fail, the other mirrored site would continue
working properly until any damage was repaired. We carry a $2 million general
insurance policy, but cannot be certain that this policy will adequately cover
any potential losses that may occur. Our disaster recovery plans rely heavily
on having one mirrored site up and running at all times. Losses and liabilities
arising from uninsured or underinsured events could materially affect our
business, results of operations and financial conditions.
DEPENDENCE ON CONTINUED GROWTH OF ONLINE COMMERCE.
The market for Internet e-commerce has only recently begun to develop and
is rapidly evolving. While many Internet e-commerce companies have grown in
terms of revenue, few are profitable. We cannot assure you that we will be
profitable, and we anticipate losses in the foreseeable future. As is typical
for a new and rapidly evolving industry, demand and market acceptance for
recently introduced services and products over the Internet are subject to a
high level of uncertainty and there are few proven services and products.
Moreover, as the market for selling products online is relatively new and
evolving, it is difficult to predict the future growth rate, if any, and
eventual size of this market.
Since all of our business is generated from its Internet storefronts, our
future revenues and any future profits are dependent upon the willingness of
consumers to accept the Internet as an effective medium of commerce. We are
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especially dependent upon the long-term acceptance of online commerce. Rapid
growth in the use of and interest in online services is a recent phenomenon, and
we can give no assurances that acceptance and use will continue to develop or
that a sufficiently broad base of consumers will adopt and continue to use the
Internet and other online services as a medium of commerce. Demand and market
acceptance for recently introduced services and products over the Internet are
subject to a high level of uncertainty and there exists few proven services and
products. We rely on consumers who have historically used traditional means of
commerce to purchase merchandise. For us to be successful, these consumers must
accept and utilize novel ways of conducting business and obtaining information.
Our future success is substantially dependent on the continued growth of
the Internet. The Internet is relatively new and is rapidly evolving. Our
business would be adversely affected if Internet usage does not continue to
grow. Internet usage may be inhibit by a number of reasons, including:
- - the Internet may not be able to support the demand placed on it, or its
performance or reliability may decline as usage increases;
- - security and authentication concerns with respect to the transmission of
confidential information over the Internet, such as credit card numbers,
and attempts by unauthorized computer users ("hackers") to penetrate
online security systems; and
- - privacy concerns, such as those related to the placement by Internet sites
of certain information to gather user information, known as "cookies,"
on a user's hard drive without the user's knowledge or consent.
Our market is characterized by rapidly changing technologies, evolving
industry standards, new service introductions and changing customer demands. To
be successful, we must adapt to our rapidly evolving market by continually
enhancing our Internet storefronts and enabling technologies, and introducing
new services to address our customers' demands. We could incur substantial
costs if we need to modify our services or infrastructure in order to adapt to
these or other changes affecting providers of Internet services. Our business,
results of operations and financial condition could be materially adversely
affected if we incurred substantial costs to adapt, or cannot adapt, to these
changes. Due to the rapidly evolving nature of Internet e-commerce, we may be
subject to risks, now and in the future, of which we are not currently aware.
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UNCERTAIN ACCEPTANCE OF THE COMPANY'S BRAND.
To be successful, we must continue building, maintaining and enhancing our
brand. To build our brand, which may be particularly critical in attracting
online traffic to our Internet storefronts, we must succeed in our marketing
efforts and with providing high-quality services and content to our customers.
We have had a limited operating budget in the past and have not spent as much on
building our brand as have some of our competitors. In the future, provided the
necessary capital is available, we intend to dedicate a larger percentage of our
resources to building our brand. We may find it necessary to further increase
our financial commitment to building and maintaining our brand with consumers.
If we incur excessive expenses in our attempt to promote and maintain our brand,
our business, results of operations and financial condition could be materially
adversely affected. If our marketing efforts are unsuccessful, or if we cannot
increase our brand awareness, our business, financial condition and results of
operations would be materially adversely affected.
RAPID TECHNOLOGICAL CHANGE.
To remain competitive, we must continue to enhance and improve the
responsiveness, functionality and features of our Internet storefronts. Internet
e-commerce is currently characterized by rapid technological change, changes in
customer requirements and preferences, frequent new product and service
introductions embodying new technologies, and the emergence of new industry
standards and practices that could render our existing Internet storefronts and
enabling technologies obsolete. If we are unable, for technical, legal,
financial or other reasons, to adapt quickly to changing market conditions and
customer requirements, our business, financial condition and results of
operations would be materially adversely affected.
RELIANCE ON CERTAIN VENDORS.
We purchase the merchandise we sell via our Internet storefronts from a
variety manufacturers and distributors. However, because the majority of our
current business is derived from the sale of computer hardware, software and
peripheral products, we currently rely substantially on two major distributors:
Ingram Micro and Tech Data. If we fail to develop and maintain relationships
with these and other manufacturers and distributors, we may not be able to
purchase and inventory sufficient quantities of products at acceptable costs
levels. In the event we cannot secure sufficient amounts of products to sell,
our business, financial condition and results of operations would be materially
adversely affected.
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TRADEMARKS AND PROPRIETARY RIGHTS.
We view our service marks, trademarks, trade secrets and similar
intellectual property as instrumental to our success. We rely heavily on
trademark and copyright law, trade secret protection, and confidentiality and/or
licensing agreements with our employees, customers, strategic partners and
others to protect our proprietary rights. We have licensed in the past, and
anticipate doing so again in the future, certain propriety rights, such as
trademarks or copyrighted material, to third parties. While we attempt to
ensure that the quality of our brand is maintained by our licensees, we cannot
assure you that our licensees will not take actions that might materially
adversely affect the value of brand, and subsequently our business, financial
condition and results of operations. We can give you no assurance that the
steps we have taken to protect our proprietary rights will be adequate or that
third parties will not infringe or misappropriate our service marks, trademarks,
trade secrets and other intellectual property rights. In addition, we can give
you no assurance that others will not independently develop similar intellectual
property. If we fail to protect our intellectual property, our business,
financial condition and results of operations could be materially adversely
affected. Furthermore, we may need to engage in future litigation to enforce
our intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. If we engage in
such litigation, it could result in substantial costs and diversion of
management and technical resources, either of which could materially affect our
business, financial condition and results of operations.
In addition, we can give no assurance that other parties will not assert
infringement claims against us and that such a claim will not be asserted or
prosecuted against us. If such a claim is made in the future, our business,
financial condition and results of operations could be materially adversely
affected. Defending such a claim, whether it is with or without merit, could
result in costly litigation and a diversion of management and technical
personnel, cause product shipment delays, or require us to develop
non-infringing technology or enter into royalty or licensing agreements. A
royalty or licensing agreement, if required, may not be available on terms
acceptable to us, if at all. In the event of a successful claim and our failure
or inability to develop non-infringing technology or license the technology, our
business, financial condition and results of operations would be materially
adversely affected.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
We are not currently subject to direct regulation by any domestic or
foreign governmental agency, other than regulations applicable to businesses
generally, export control laws and laws or regulations directly applicable to
online commerce. However, due to the increasing popularity and use of the
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Internet and other online services, it is possible that a number of laws and
regulations may be adopted with respect to the Internet or other online services
covering issues such as user privacy, pricing, content, copyrights, distribution
and characteristics and quality of products and services. Furthermore, the
growth and development of the market for online commerce may prompt calls for
more stringent consumer protection laws that may impose additional burdens on
those companies conducting business online. The adoption of certain additional
laws or regulations may decrease the growth of the Internet or other online
services, which could, in turn, decrease the demand for our products and
services and increase our cost of doing business, or otherwise have a material
adverse effect on our business, financial condition and results of operations.
Moreover, the applicability to the Internet of existing laws governing
issues such as property ownership, copyrights and other intellectual property
issues, taxation, libel, obscenity and personal privacy is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the unique
issues of the Internet and related technologies. Changes to such laws intended
to address these issues, including some recently proposed changes, could create
uncertainty in the Internet marketplace which could reduce demand for our
services or increase the cost of doing business as a result of costs of
litigation or increased service delivery costs, or could in some other manner
materially adversely affect our business, financial condition and results of
operations.
In addition, because our services are available over the Internet in
multiple states and foreign countries, such jurisdictions may claim that we are
required to qualify to do business as a foreign corporation in each such state
or foreign country. We are currently qualified to do business only in Colorado
and Florida. If we fail to qualify as a foreign corporation in a jurisdiction
where it is required to do so, we could become subject to taxes and penalties
for failure to qualify, which could materially adversely affect our business,
financial condition and results of operations, and could result in our inability
to enforce contracts in such jurisdictions. Any such new legislation or
regulation, the application of laws and regulations from jurisdictions whos laws
do not currently apply to our business, or the application of existing laws and
regulations to the Internet and other online services, could materially
adversely affect our business, financial condition and results of operations.
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ONLINE COMMERCE SECURITY RISK; CREDIT CARD FRAUD.
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. We rely on
licensed third party encryption and authentication technology to provide the
security and authentication necessary to effect secure transmission of
confidential information, such as customer credit card numbers. Advances in
computer capabilities, new discoveries in the field of cryptography, or other
events or developments may result in a compromise or breach of the algorithms we
use to protect our customers, transaction data or our software vendors and
products. Any well-publicized compromise of security could deter Internet
e-commerce in general, or use of the Internet to conduct transactions involving
transmission of confidential information or downloading sensitive materials.
Someone who is able to circumvent our security measures could misappropriate
proprietary information or cause interruptions in our operations. We may be
required to expend significant capital and other resources to protect against
such security breaches or alleviate problems caused by such breaches. Such
expenditures could have a material adverse effect on our business, results of
operations and financial condition.
Concerns over security and the transmission of confidential information
over the Internet and privacy concerns may hinder the growth of Internet
e-commerce in general, especially when using credit cards to make online
purchases. Because we store and transmit proprietary information, such as
credit card numbers, a breach of our security could damage our reputation and
expose us to potential liability from litigation and reimbursement of losses.
We can give you no assurance that our security measures will prevent a future
security breach or that, should a security breach occur, it will not have a
material adverse effect on our business, results of operations and financial
condition. In addition, we have incurred losses, as have other retailers who
accept credit card payments without obtaining a signature, from orders placed
using fraudulent or stolen credit card information, despite obtaining approvals
from financial institutions. Under current commercial banking and credit card
practices, we are liable for fraudulent credit card transactions. Our security
measures to date have been successful and our losses due to credit card fraud
have not been material. We can give you no assurance that our security measures
will always be successful and, as a result, could suffer from significant losses
in the future which could have a material adverse effect on our business,
results of operations and financial condition.
LIABILITY FOR INTERNET CONTENT.
We could be exposed to liability for third-party information that may be
accessible through our Internet store-fronts. Such claims might assert, among
other things, that, by directly or indirectly providing links to Internet sites
operated by third parties, we should be liable for copyright or trademark
16
<PAGE>
infringements or other wrongful actions by such third parties through such
Internet sites. It is also possible that, if any third party content
information provided on our Internet storefronts contain errors, consumers might
make claims against us for losses incurred in reliance on such information.
At times, we also enter into agreements with other companies under which
any revenue that results from the purchase of services through direct links to
or from our Internet sites is shared. Such arrangements may expose us to
additional legal regulation and potential liabilities to consumers of these
services, even if we do not provide the services ourselves. We cannot assure
you that any indemnification provided to us in our agreements with these
parties, if available, will be adequate.
We may not be able to obtain and maintain adequate insurance. Our general
liability insurance may not cover all potential claims to which we may be
imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on our
business, results of operations and financial conditions.
SALES AND OTHER TAXES.
We do not currently collect sales and other similar taxes in respect to our
shipment of goods into states other than Colorado and Florida. However, one or
more local, state or foreign jurisdictions may seek to impose sales tax
collection obligations on out of state companies, such as ourselves, which
engage in online commerce. In addition, any new operation in states outside of
Colorado or Florida could subject shipments into such states to state sales
taxes under current or future laws. A successful assertion by one or more
states or any foreign country that we should collect sales or other taxes on the
sale of merchandise could have a material adverse effect on our business,
prospects, financial condition and results of operations.
NO DIVIDENDS AND NONE ANTICIPATED.
We have never paid nor declared any cash dividends on our Common Stock.
Payment of dividends on our Common Stock is within the discretion of the Board
of Directors and will depend upon our earnings, our capital requirements and
financial condition, and other factors deemed relevant by the Board. For the
foreseeable future, the Board intends to retain future earnings, if any, to
finance our business operations and does not anticipate paying any cash
dividends with respect to the Common Stock.
17
<PAGE>
ANTI-TAKEOVER; "POISON PILL" PROVISIONS.
Certain provisions of our Certificate of Incorporation, our Bylaws and
Colorado law could make it more difficult for a third party to acquire us, even
if doing so might be beneficial to our shareholders. These provisions include
the ability of our Board of Directors, without further shareholder approval, to
issue Preferred Stock with all rights, powers and privileges of the Common
Stock. An issuance of such Preferred Stock may have the effect of delaying,
deferring or preventing a change in control without requiring any action from
our stockholders, and could adversely affect the voting and other rights of our
Common Stock stockholders. Additionally, certain provisions of our Certificate
of Incorporation, Bylaws and Colorado law could delay or make a merger, tender
offer or proxy contest more difficult.
NO PRIOR PUBLIC MARKET.
There is no public market currently available for our Common Stock.
Although we intend to apply for a listing of our Common Stock on the OTC
Bulletin Board, or other similar qualified secondary stock exchange, under the
anticipated trading symbol "ANYI", we can give you no assurance that an active
trading market will develop or, if developed, be sustained or that the market
price of our Common Stock will not decline once trading commences. Even if an
active trading market does develop, the market price of our Common Stock is
likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as:
- - actual or anticipated variations in our quarterly operating results;
- - announcements of new product or service offerings;
- - future technological innovations;
- - new commercial products;
- - changes in regulation;
- - changes in financial estimates by securities analysts;
- - conditions and trends in the Internet and e-commerce industries;
- - changes in the economic performance and/or market valuations of other
Internet, e-commerce and retail companies; and
- - general market conditions and other general factors.
18
<PAGE>
Furthermore, the stock markets, and in particular the OTC Bulletin Board
and NASDAQ stock markets, have experienced extreme price and volume fluctuations
that have particularly affected the market prices of many technology and
Internet companies and have often been unrelated or disproportionate to the
operating performance of such companies. Additionally, the market price of our
Common Stock could be adversely affected by loses or other negative news
regarding one or more other companies, despite the fact that such information is
not related to us specifically. The trading prices of many technology and
Internet companies' stocks are at or near their historical highs. We cannot
assure you that such high trading prices will be sustained. These broad market
factors may adversely affect the market price of our Common Stock. In addition,
general economic, political and market conditions such as recessions, interest
rates or international currency fluctuations may adversely affect the market
price of our Common Stock.
More specifically, trading in Internet stocks has been extremely volatile,
and recent newspaper articles have suggested that, in response to such
volatility, the National Association of Securities Dealers (NASD), the parent of
NASDAQ and the OTC Bulletin Board, is considering authorizing trading halts on
such stocks under certain circumstances and that certain broker-dealer firms
have imposed restrictions on purchasing Internet stocks with borrowed funds. We
are unable to predict whether the SEC, NASD, broker-dealers or others may adopt
regulations or internal policies regarding trading in Internet stocks. In the
past, following periods of volatility in the market price of a company's
securities, securities class action litigation has often been instituted against
such a company. Such litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources, which could have
a material adverse effect on our business, results of operations and financial
condition.
Additionally, on January 1, 1999, the SEC imposed a new series of
regulations mandating all new listing OTC Bulletin Board companies to begin
making regular filings with the SEC prior to their first day of trading. As
soon as the SEC declares this registration statement "effective", we will be
compelled to make regular filings with the SEC and, as a result, will be in full
compliance with these new regulations, regardless of which stock exchange our
Common Stock may eventually trade on.
PENNY STOCK RULES
Because there is no current market established for our Common Stock, we are
unsure at what price range our Common Stock may eventually settle into once
trading begins. While early indications from market-makers suggest our stock
will open and trade above $5.00 a share, it is important to point out that the
SEC has adopted a set of rules that regulate broker-dealer securities with a
price of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the Nasdaq system, provided that current price
19
<PAGE>
and volume information regarding transactions in such securities is provided by
the exchange or system). The penny stock rules require a broker-dealer to
deliver to the customer a standardized risk disclosure document prepared by the
SEC that provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the
customer with other information. The penny stock rules require that prior to a
transaction in a penny stock, the broker-dealer must determine in writing that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may reduce the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. If our Common Stock should trade
under $5.00 a share and become subject to the penny stock rules, investors in
our Common Stock may find it more difficult to sell their Common Stock.
USE OF PROCEEDS
We will receive proceeds from the sale of the Common Stock being registered
herein if and only if the Warrants it underlies are exercised. We anticipate
using these proceeds, if any, for working capital, debt reduction and expansion
purposes.
DETERMINATION OF OFFERING PRICE.
Our Board of Directors arbitrarily decided upon the $3.00 exercise price
for the outstanding Stock Purchase Warrants, issued as part of a private
placement of Units in December 1998, into shares of the Common Stock being
registered herein. Their decision bears no price relationship to assets, book
value, earnings or other criteria of value.
DILUTION
As of January 25, 1999, there were 3,074,400 shares of the Company's Common
Stock issued and outstanding. The Company's Common Stock had a net tangible
book value per share of approximately $0.02 as of December 31, 1998, based upon
3,020,000 shares then issued and outstanding. Net tangible book value per share
represents the amount by which the Company's total tangible assets exceed its
total liabilities, divided by the number of shares of its Common Stock
outstanding.
20
<PAGE>
After giving effect to the sale of the 200,000 shares of Common Stock being
offered herein and the application of the net proceeds therefrom there would be
a total of 3,274,400 shares of Common Stock issued and outstanding with a net
tangible book value per share of approximately $0.20. This would represent an
immediate increase in net tangible book value of $0.18 per share to existing
shareholders and an immediate dilution of $2.80, or 93.33%, of the offering
price per share to existing Warrant holders. Dilution is determined by
subtracting net tangible book value per share after the Warrants are exercised
from the amount paid by Warrant holders for the shares of Common Stock.
The following table illustrates the per share dilution:
Offering price per share $3.00
Net tangible book value per share prior
to any warrants being exercised $0.02
Increase attributable to exercising
warrant holders $0.18
---------
New tangible book value per share after the exercise $0.20
---------
Dilution per share to exercising warrant holders $2.80
=========
The following table summarizes, on a pro forma basis as of January 25,
1999, the differences between the number of shares of Common Stock purchased
from the Company, the total consideration paid and the average price per share
paid by existing stockholders and by new investors exercising their Warrants
into Common Stock (at a $3.00 exercise price).
<TABLE>
<CAPTION>
Shares Purchased
-----------------
Number Percent Total Amount ($)
------ ------- ----------------
<S> <C> <C> <C>
Existing Stockholders 3,074,400 93.89% $ 391,700
New Investors 200,000 6.11% 600,000
--------- ------ --------
Total 3,274,400 100.0% $ 991,700
========= ====== ========
</TABLE>
The foregoing discussion and table assumes no exercise of outstanding
options or warrants subsequent to January 25, 1999, and excludes: (i) 500,000
options to purchase Common Stock at $1 a share granted to Company founders; (ii)
21
<PAGE>
50,000 options to purchase Common Stock at $40 a share granted to J. Scott
Sitra, the Company's President and Chief Executive Officer; (iii) 25,000 options
to purchase Common Stock at $75 a share granted to J. Scott Sitra; (iv) 25,000
options to purchase Common Stock at $100 a share granted to J. Scott Sitra; (v)
10,000 options to purchase Common Stock at $3.00 a share granted to Richard
Baron, a Company employee; and 200,000 shares reserved to establish an Employee
Stock Ownership Program (ESOP).
CAPITALIZATION
The following table sets forth as of December 31, 1998 (i) the actual
capitalization of the Company and (ii) the capitalization of the Company after
the exercise of Warrants into Common Stock, assuming all Warrants are exercised.
<TABLE>
<CAPTION>
After Warrant
Amount Outstanding Exercising (1)
------------------ ---------------
<S> <C> <C>
Short-Term Debt $ 145,250 -
Total stockholders' equity
Common Stock, no par value;
50,000,000 shares authorized (2) $ 68,380 $ 668,380
Retained Earnings
(Accumulated Deficit) ($162,620) ($162,620)
- --------------------------------
<FN>
1. This table assumes all Warrants are exercised into Common Stock.
2. For detailed information regarding the terms and conditions of the
Company's Common Stock and Warrants see "Description of Securities."
</TABLE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of January 25, 1999
pertaining to the beneficial ownership of the Warrants that may be exercised
into the shares of Common Stock being registered in this registration statement.
22
<PAGE>
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Ownership Percentage
Prior to After the Owned After
Number of Warrant Warrant the Warrant
Selling Stockholder Warrants Held Exercise Exercise(1) Exercise(2)
- ------------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Ludwig Francis Hangley 5,000 5,000 10,000 *
Michael G. Fountain 5,000 5,000 10,000 *
Richard Jess Baron and
Jacqueline Mary Baron (3) 10,000 10,000 20,000 *
Andrew H. Savitt 5,000 5,000 10,000 *
Susie Shu-Chun Lin 1,000 1,000 2,000 *
Keith Boehme 5,000 5,000 10,000 *
Lloyd K. Parish, Jr. 10,000 33,146 43,146 1.31%
Matthew C. Anselmo 5,000 5,000 10,000 *
Steven Paul Fischer 45,000 45,000 90,000 2.74%
Gregory Scott Waugh 5,000 5,000 10,000 *
Michael Streiter 12,000 12,000 24,000 *
David R. Hayes and
Barbara J. Hayes 30,000 35,865 65,865 2.01%
David M. Noah 5,000 5,000 10,000 *
Jeri Elaine Steppat (4) 1,500 1,500 3,000 *
Raymond D. Schick 1,000 1,000 2,000 *
Gregory M. Thisse 2,500 2,500 5,000 *
Donald J. Horning (5) 3,000 3,200 6,200 *
Robie C. Blair (6) 4,000 4,200 8,200 *
Bradley N. Greene 12,000 12,000 24,000 *
James W. Tindell and
Louise A. Tindell 5,000 5,000 10,000 *
Paragon Communications, Ltd. 8,000 47,922 55,922 1.70%
John A. Murray, Jr. 15,000 15,000 30,000 *
Michael W. Tindell 5,000 5,000 10,000 *
As a Group 200,000 269,333 469,333 14.33%
<FN>
(*) Less than 1%.
(1) Assumes all Warrants are exercised into Common Stock. It further assumes
that until a market develops for the Common Stock, if ever, it will be
extremely difficult for the Selling Stockholders to readily sell their
shares of Common Stock. Therefore, no immediate sales of Common Stock are
anticipated and the table assumes Selling Stockholders will maintain their
holdings until such a market develops, if ever.
(2) Based on total issued and outstanding shares of 3,274,400.
(3) Mr. Richard Baron is an employee of the Company.
(4) Mrs. Jeri Steppat is a former employee of the Company.
(5) Mr. Donald Horning is a former employee of the Company.
(6) Mr. Robie Blair is an employee of the Company. See "Directors, Executive
Officers, and Key Management Personnel".
</TABLE>
23
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock being registered in this registration statement
are being sold for the account of the Selling Shareholders. Such shares may be
offered for sale from time to time at market prices prevailing at the time of
sale or at negotiated prices, and without payment of any underwriting discounts
or commissions except for the usual and customary selling commissions paid to
stockbrokers and broker-dealers. The shares of Common Stock covered by this
registration statement may be offered for sale on any secondary market our
Common Stock may trade on, should one ever develop. Selling Shareholders are
under no obligation to sell their shares of Common Stock.
Under the Exchange Act and the regulations thereto, any person engaged in a
distribution of the shares covered by this registration statement may not
simultaneously engage in market making activities with respect to the Common
Stock during the applicable "cooling off" periods prior to the commencement of
such distribution. In additional, and without limiting the foregoing, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including, without limitation,
Rules 10b-6 and 10b-7, which provisions may limit the timing of purchases and
sales of Common Stock by the Selling Shareholders.
LEGAL PROCEEDINGS
The are no material legal proceedings pending or, to the Company's
knowledge, threatened against the Company.
24
<PAGE>
DIRECTORS, EXECUTIVE OFFICERS, AND KEY MANAGEMENT PERSONNEL
The directors, executive officers and key management personnel of the
Company, their ages as of April 22, 1999, and their positions with the Company
are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ----------------- --- ----------------------------------
<S> <C> <C>
J. Scott Sitra 26 President, Chief Executive Officer
and Director; Chairman, AnythingPC
Internet Corporation
Robert C. Schick 35 Director and Chief Technology
Officer; President and Director,
AnythingPC Internet Corporation
Robie Blair 31 Manager of Information Systems
Alfred W. Delisle 34 Business Development Manager,
Director; Director, AnythingPC
Internet Corporation
Cameron B. Yost 45 Secretary, Treasurer, Director;
Director, AnythingPC Internet
Corporation
Richard Baron 36 General Manager
</TABLE>
The Board of Directors of the Company is comprised of only one class of
director. Each director is elected to hold office until the next annual meeting
of shareholders and until his successor has been elected and qualified.
Officers are elected annually by the Board of Directors and hold office until
successors are duly elected and qualified. The following is a brief account of
the business experience of each director and executive officer of the Company.
There is no family relationship between any Director or Executive Officer of the
Company.
The Company has a compensation committee which was established on September
28, 1998, and consists of Alfred W. Delisle and J. Scott Sitra.
J. SCOTT SITRA, President, Chief Executive Officer and Director is also the
Chairman of AnythingPC Internet Corporation, concurrently is the President and
Chief Executive Officer of Sitra Enterprises, Inc., a privately held
international management and financial consulting firm specializing in assisting
emerging, high-growth companies evolve from the developmental stage into
profitable operating entities. Sitra Enterprises has actively participated in
the successful growth and development of several private and public companies.
Mr. Sitra has participated as a principal and executive officer in several
successful start-up and turn-around ventures, and has extensive experience
working directly with the investment community. In one such venture he took
25
<PAGE>
over the offices of President and Chief Executive Officer of Lucky "S" Oil
Company, Inc., a privately held Texas oil and gas exploration company, in 1992.
Under his leadership, Lucky "S" successfully acquired 100% working interest in
13 producing horizontal oil and gas wells in Frio County, Texas through the
United States Bankruptcy Court in San Antonio, Texas for $310,000. The wells,
which were drilled at an initial aggregate cost of $20 million, were producing
in excess of 230 barrels of oil per day (BOPD) at the time of acquisition, and
generated in excess of $80,000 in gross revenue during the first three weeks of
production under Mr. Sitra's management. Mr. Sitra has been a Director since
October 1998 and held his other positions since April 1999.
ROBERT C. SCHICK, Chief Technology Officer, Director, and President, Chief
Executive Officer and Director of AnythingPC Internet Corporation, co-founded
the Company in August 1997. Mr. Schick has over 14 years experience with the
computer industry ranging from a computer operator in the U.S. Army to an Apple
Products Manager at Tech Data Corporation where he was responsible for over $50+
million dollars a year in revenue; he was also responsible for marketing to
Apple's internal sales force as well their 35,000+ resellers. Prior to joining
the Company, Mr. Schick was the Southeast Accounts Manager for Bendata, Inc., a
software company offering help-desk solutions to corporate MIS departments at
Fortune 1000 companies, manufacturers and educational and financial
institutions. Before joining Bendata in 1996, Mr. Schick worked at Tech Data, a
wholesale electronics distributor, where he was responsible for working with
Fortune 1000 companies, negotiating vendor contracts, and overseeing purchasing
to maintain an efficient inventory matrix. Throughout his tenure at Tech Data
Mr. Schick continually exceed all of his sales and performance quotas. Mr.
Schick was President of the Company from August 1997 to April 1999 when he moved
into his current positions; he has always been a Director of the Company.
ROBIE BLAIR, Manager of Information Systems, has over 10 years of
experience in the computer industry ranging from building integrated ceramic
capacitors with Kyocera Corporation, formerly AVX Corporation, to a Technical
Coordinator for Apple Computer Corporation. Prior to joining the Company, he
held the position of Customer Applications Support Engineer at MCI
Communications. Mr. Blair has held his position since November 1998.
ALFRED W. DELISLE, Business Development Manager and Director is also a
Director of AnythingPC Internet Corporation, co-founded the Company in August
1997. Mr. Delisle has over 14 years of experience in the hardware and software
industry and more than eight years of experience in wholesale distribution with
Tech Data Corporation, the world's second largest distributor of personal
computers, peripherals, software and related components, where he has held a
variety of positions within their high-volume sales division. Prior to working
for Tech Data, Mr. Delisle was employed by Boston Micro, a reseller specializing
26
<PAGE>
in establishing channel sales relationships between U.S. manufacturers and
distributors in Western Europe. Mr. Delisle left his position at Tech Data in
December 1998 to focus his full attentions to his duties at the Company. Mr.
Delisle has held his positions with the Company since August 1997 and with
AnythingPC Internet Corporation since April 1999.
CAMERON B. YOST, Secretary, Treasurer and a Director is also a Director at
AnythingPC Internet Corporation, is concurrently the President and Chief
Executive Officer of Banyan Corporation, a publicly traded corporation. Banyan
designs, manufactures and markets accessory products for personal computers with
a focus on notebook computers; Banyan also retains a significant equity position
in the Company. See "Principal Shareholders". Prior to joining Banyan in 1995,
Mr. Yost worked at Vornado Air Circulation Systems as a co-founder and vice
president where he helped generate $2.8 million and $5.7 million in sales during
the first and second years of operation, respectively. Prior to Vornado, Mr.
Yost materially participated as a principal and executive officer in other
successful start-up and turnaround ventures. Mr. Yost has held his positions
with the Company since October 1998 and with AnythingPC Internet Corporation
since April 1999. Mr. Yost is currently under indictment in the U.S. District
Court for the Southern District of New York for conspiracy to commit securities
fraud, mail fraud and commercial bribery in connection with the common stock of
Banyan Corporation. Mr. Yost has been, and plans on continuing to, vigorously
deny any and all charges brought against him.
RICHARD BARON, General Manager, has over eight years of
business-to-business sales in the personal computer and electronics industry.
Prior to joining the Company he was a Senior Sales Representative at Tech Data
Corporation (NASDAQ: TECD), a full-line distributor of technology products
worldwide with annual sales of approximately $11.5 billion. At Tech Data Mr.
Baron was responsible for generating sales to value added resellers (VARs) and
dealers in excess of $100 million annually. He also won Tech Data's coveted
President's Club Award twice while there. Mr. Baron has been with the Company
since March 1999.
DIRECTOR COMPENSATION
Directors are compensated $5,000 annually, which, as determined by the
Board, may be taken in the form of cash or securities of the Company.
Additionally, the Company reimburses its Directors for reasonable out-of-pocket
expenses incurred in attending meetings of the Board of Directors.
27
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the fiscal year
ending June 30, 1998 to the Company's Chief Executive Officer and each of the
Company's officers and directors. No executive officers received any
compensation in fiscal 1998, no person received compensation equal to or
exceeding $100,000 in fiscal 1998, no bonuses were awarded during fiscal 1998,
and no persons received compensation from the Company prior to fiscal 1998.
<TABLE>
<CAPTION>
Name and Principal
Position (1) Salary Options Granted (2)
- --------------------- ------ -------------------
<S> <C> <C>
Robert C. Schick (3) None 205,000
Alfred W. Delisle (4) None 110,000
Bernard Sandoval (5) None 60,000
<FN>
(1) Directors Cameron B. Yost and J. Scott Sitra were not elected to the
Board of Directors until August 22, 1998 and were compensated, along
With Directors Robert C. Schick and Alfred W. Delisle, 5,000 shares of
Common Stock each with an aggregate value of $800 for services rendered
through December 31, 1998.
(2) Currently fully vested, exercisable into Common Stock at $1.00 a share,
and expire on February 29, 2000.
(3) Served as President and a Director since co-founding the Company in
August 1997.
(4) Has served as the Business Development Manager and Director since
co-founding the Company in August 1997.
(5) Co-founded the Company in August 1997 and served as the Marketing
Director until September 1998.
</TABLE>
J. Scott Sitra, who assumed his duties as President and Chief Executive
Officer of the Company on April 1, 1999, has a first year compensation package
consisting of a salary of one-dollar ($1) and options to purchase 100,000 shares
of the Company's Common Stock at the following exercise prices: 50,000 at $40 a
share, 25,000 at $75 a share and 25,000 at $100 a share.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding the beneficial ownership of Common Stock as of April 22, 1999, by (i)
each Director of the Company, (ii) each executive officer of the Company, (iii)
all directors and executive officers as a group, and (iv) each person known to
the Company to be the beneficial owner of more than 5% of its outstanding shares
of Common Stock.
28
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------------------
Percentage Owned(1)
-------------------------
Before After
Directors and Executive Officers Shares Held Exercising Exercising
- -------------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
J. Scott Sitra (2) 10,000 * *
P. O. Box 50404
Austin, TX 78763
Robert C. Schick (3) 216,897 7.1% 6.6%
3020 North El Paso, Ste. 103
Colorado Springs, CO 80907
Alfred W. Delisle (4) 120,959 3.9% 3.7%
4525 S. Renellie Dr.
Tampa, FL 33611-2124
Cameron B. Yost 38,880 1.3% 1.2%
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907
All current directors and executive
officers as a group (4 persons) (5) 386,736 12.6% 11.8%
Five Percent Shareholders
- ------------------------------------
Banyan Corporation
4740 Forge Rd., Bldg. 112
Colorado Springs, CO 80907 800,027 26.0% 24.4%
- -----------------------------------
<FN>
* Less than 1%
(1) Percentage of ownership is based on 3,074,400 shares of Common Stock
issued and outstanding as of April 22, 1999, and 3,274,400 shares
of Common Stock issued and outstanding as a result of Warrant Holders
exercising their Warrants into Common Stock, assuming all outstanding
Warrants are exercised into Common Stock.
(2) Does not include an additional 100,000 shares of Common Stock subject to
options which are currently exercisable. These stock purchase options
were granted on April 1, 1999.
(3) Does not include an additional 205,000 shares of Common Stock subject to
options which are currently exercisable.
(4) Does not include an additional 110,000 shares of Common Stock subject to
options which are currently exercisable.
(5) Does not include an additional 315,000 shares of Common Stock subject to
options which are currently exercisable. See notes 2 and 3 above.
</TABLE>
29
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Company is authorized by its Articles of Incorporation, as amended, to
issue an aggregate of 50,000,000 shares of Class 'A' Common Stock, no par value,
("Common Stock"); 25,000,000 shares of Class 'B' Common Stock, no par value,
("Class B Common Stock"); 10,000,000 shares of Class 'A' Preferred Stock, no par
value, ("Class A Preferred Stock"); and 10,000,000 shares of Class 'B' Preferred
Stock, no par value, ("Class B Preferred Stock"). As of April 22, 1999 there
were 3,074,400 shares of Common Stock issued and outstanding, 4,086,000 on a
fully diluted basis, and no shares of Class 'B" Common Stock, Class 'A'
Preferred Stock or Class 'B' Preferred Stock. There were also 200,000 Stock
Purchase Warrants issued entitling the holder to purchase one share of Common
Stock for each Warrant tendered at a purchase price of $3 a share and
outstanding options to purchase 610,000 shares of Common Stock at prices ranging
from $1.00 to $100.00 a share. The Company has also set aside a reserve of
200,000 shares of Common Stock for an Employee Stock Ownership Program.
COMMON STOCK
The Articles of Incorporation authorizes the Company to issue up to
50,000,000 shares of Common Stock, Class A, no par value. The holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the shareholders. Subject to the rights and preferences
of the holders of any outstanding Class 'A' Preferred Stock and/or Class 'B'
Preferred Stock, the holders of Common Stock are entitled to receive ratably
such dividends as are declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, holders of Common Stock have the right to a ratable portion of
assets remaining after the payment of all debts and liabilities of the Company,
subject to the liquidation preferences of the holders of any outstanding Class
'A' Preferred Stock and/or Class 'B' Preferred Stock. Holders of Common Stock
have neither preemptive rights nor rights to convert their Common Stock into any
other securities and are not subject to future calls or assessments by the
Company. There are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable. The rights, preferences and privileges of the holders of Common
Stock are subject to, and may be adversely affected by, the rights of the
holders of shares of Class 'A' Preferred Stock and/or Class 'B' Preferred Stock
that the Company may designate and issue in the future.
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CLASS 'B' COMMON STOCK
The Articles of Incorporation authorizes the Company to issue up to
25,000,000 shares of Common Stock, Class B, no par value. As of January 25,
1999 there were no shares of Common Stock, Class B issued or outstanding. The
Board of Directors is authorized, subject to certain limitations prescribed by
Colorado law, without further action by the shareholders, to issues shares of
Class 'B' Common Stock and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences and sinking fund terms.
The Company believes that the Board of Directors' power to set the terms of, and
the Company's ability to issue, Class 'B' Common Stock will provide flexibility
in connection with possible financing transactions in the future. The issuance
of Class 'B' Common Stock, however, could adversely affect the voting power of
holders of Common Stock and decrease the amount of any liquidation distribution
to such holders. The presence of outstanding Class 'B' Common Stock could also
have the effect of delaying, deterring or preventing a change in control of the
Company. The Company has no present plans to issue any shares of Class 'B'
Common Stock.
CLASS 'A' PREFERRED STOCK AND CLASS 'B' PREFERRED STOCK
The Articles of Incorporation authorizes the Company to issue up to
10,000,000 shares of each: Class 'A' Preferred Stock, no par value, and Class
'B' Preferred Stock, no par value. As of January 25, 1999 there were no shares
of either Class 'A' Preferred Stock or Class 'B' Preferred Stock issued or
outstanding. The Board of Directors is authorized, subject to certain
limitations prescribed by Colorado law, without further action by the
shareholders, to issues shares of Class 'A' Preferred Stock and/or Class 'B'
Preferred Stock and to fix the rights, preferences, privileges and restrictions
thereof, including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences and sinking fund terms. The Company
believes that the Board of Directors' power to set the terms of, and the
Company's ability to issue, Class 'A' Preferred Stock and/or Class 'B' Preferred
Stock will provide flexibility in connection with possible financing
transactions in the future. The issuance of Class 'A' Preferred Stock and/or
Class 'B' Preferred Stock, however, could adversely affect the voting power of
holders of Common Stock and/or Class 'B' Common Stock and decrease the amount of
any liquidation distribution to such holders. The presence of outstanding Class
'A' Preferred Stock and/or Class 'B' Preferred Stock could also have the effect
of delaying, deterring, or preventing a change in control of the Company. The
Company has no present plans to issue any shares of Class 'A' Preferred Stock or
Class 'B' Preferred Stock.
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WARRANTS
As of January 25, 1999, the Company had 200,000 Stock Purchase Warrants
issued in conjunction with a private placement of Units completed in December
1998 made in accordance with an exemption from registration under Regulation D,
Rule 504 of the Securities Act. Each outstanding Warrant entitles the holder to
purchase one share of Common Stock at an exercise price of $3.00 per share
through January 15, 2000 at which time the Warrants expire. The Warrants
contain provisions that protect the holder against dilution by adjustment of the
exercise price in certain events, including, but not limited to, stock
dividends, stock splits (forward and reverse), reclassifications and/or mergers.
The holder of a Warrant does not possess any rights as a shareholder of the
Company. The shares of Common Stock, when issued upon the exercise of the
Warrants in accordance with the terms thereof, will be fully paid and
non-assessable.
The Company may redeem the Warrants, at a price of $0.01 per Warrant, at
any time through January 15, 2000 upon not less than 30 days, nor more than 60
days, prior written notice, provided that the closing bid quotation for the
Common Stock as reported by any quotation medium on which the Common Stock is
quoted is at least $4.00 for ten consecutive trading sessions ending on the two
days prior to the day on which notice of redemption is given.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Common Stock is Oxford
Transfer Register. Oxford's address is 317 S.W. Alder, Ste. 1120, Portland,
Oregon 97205, and their telephone number and fax numbers are (503) 225-0375 and
(503) 273-9168, respectively.
INTEREST OF NAMED EXPERTS AND COUNSEL
The financial statements of the Company at June 30, 1998, included in this
Registration Statement, have been audited by J. Paul Keynote, CPA, P.C. as
indicated in their report with respect thereto and are included herein in
reliance upon authority of said firm as experts in giving said reports.
The Company retains William M. Ziering, Esq., of San Francisco, California
as its legal counsel in the advisement of securities related matters, including
the validity of the issuance of the securities offered hereby.
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Pursuant to Colorado law, the Company's Board of Directors has the power to
indemnify officers and directors, present and former, for expenses incurred by
them in connection with any proceeding they are involved in by reason of their
being or having been an officer or director of the Company. The person being
indemnified must have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company. The
Company's By-Laws grant this indemnification to the Company's officers and
directors.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors or officers of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director or officer of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director or officer in connection with the securities being
registered, the Company will, unless in the opinion of its legal counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
DESCRIPTION OF BUSINESS
OVERVIEW
Anything Internet Corporation is an Internet e-commerce holding company
focused on building a network of successful e-commerce operating companies,
joint ventures, strategic alliances and partnerships. The anticipated outcome
of these various endeavors is the creation of the first true e-commerce
conglomerate.
Unlike most e-commerce businesses today, the Company is not limiting itself
to one specific area of e-commerce (ie. books, computers, CDs, etc.). Rather,
the Company is aggressively pursuing diversification into a variety of emerging
e-commerce venues. If successful, the Company will have:
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- - minimized its exposure and risk to normal industry specific business down
cycles;
- - increased its chances of participating in one of the few expected "super
successful" Internet e-commerce ventures; and
- - created more site traffic and revenue generating opportunities by
referring potential customers to other Internet storefronts owned and
operated by the Company rather than by a third-party.
Currently the Company operates through one wholly-owned subsidiary,
AnythingPC Internet Corporation ("AnythingPC"). AnythingPC is a rapidly growing
Internet based discount retailer of over 175,000 different computer hardware,
software and peripheral products to end consumers and businesses. Through its
Internet storefronts - www.anythingpc.com, www.anythingmac.com, and
www.anythingunix.com - AnythingPC offers one-stop shopping to its customers 24
hours a day, seven days a week. In addition to its wide array of product
offerings, AnythingPC's storefronts feature competitively priced "Hot Products",
an easy-to-use graphical interface, a powerful search engine to locate any
product desired, a unique "quote monkey" for pricing assistance on hard-to-find
products, and a special "notify me" feature that automatically notifies
customers when a backordered product arrives in stock and keeps the customer
appraised of the estimated time of arrival.
Since its incorporation on August 15, 1997, under the laws of the state of
Colorado, the Company has experienced tremendous growth in both monthly revenues
and visitors to its various Internet storefronts. Monthly sales have since
climbed to over $400,000 in March 1999. Over the same period of time the number
of monthly visitors have grown to over 100,000. To enhance the Company's brand
awareness and monthly traffic to its Internet storefronts, the Company has begun
entering into strategic marketing alliances with popular Internet content
providers and sites of interest such as C|Net's Shopper.com, mySimon.com,
Priceline.com and bottomdollar.com as well as technology enablers such as
Digital River, Inc. (NASDAQ: DRIV). The Company is currently in negotiations
with several other popular content providers and sites of interest to greatly
expand the number of such strategic alliances to further enhance its Internet
storefronts' technology, expand brand awareness, monthly traffic and subsequent
revenues.
INDUSTRY/INTERNET OVERVIEW
Growth of the Internet and Online Commerce
The Internet has emerged as a significant global medium for communications,
information and commerce, enabling millions of people to share information and
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conduct business electronically. The Company believes growth in Internet usage
and online commerce has been fueled by a number of factors including:
- - the large and growing installed base of advanced personal computers in the
home and office;
- - improvements in network infrastructure and bandwidth;
- - easier and cheaper access to the Internet;
- - increased awareness of the Internet among consumer and business users; and
- - the rapidly expanding availability of online content and commerce which
increases the value to users of being connected to the Internet.
Forrester Research, Inc., a market research firm, issued a report in
December 1998 predicting U.S. business trade on the Internet will explode from
$43 billion in 1998 to $1.3 trillion in 2003. Meanwhile, International Data
Corporation ("IDC"), another market research firm, estimated the number of
Internet users worldwide will grow from approximately 69 million at the end of
1997 to approximately 320 million by 2002. In addition, IDC estimates that the
percentage of such Internet users buying goods and services on the Internet will
increase from 26% in 1997 to 40% in 2002. The two largest segments of Internet
sales are expected to be computer hardware, software and consumer electronics
purchases and travel and vacation planning.
Traditional Methods of Retailing
The traditional retail industry is comprised of both store- and
catalog-based companies. The Company believes that these retailers face
inherent structural limitations that may not allow them to take full advantage
of the growing worldwide retail marketplace and their customer's increasingly
complex and busy daily schedules.
Store-based retailers have limited shelf space due to costly inventory,
store personnel and real estate considerations that limit the number of stock
keeping units (SKUs) they can offer to their customers. The Company believes
that large store-based retailers, also called warehouses or superstores,
typically carry only about 4,000 SKUs. As a result, manufacturers compete for
scarce retail shelf space and access to the large distributors that supply these
store-based retailers. Thus, manufacturers incur a significant expense to gain
this access and retailers face the risk of carrying inventory that may quickly
become obsolete. In addition, the store-based retailers' merchandising process,
which requires that the retailer physically obtain, set up, and display product
limits the speed at which these retailers can change their merchandise mix and
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offer new products. Furthermore, because store-based retailers must make
significant investments in inventory, real estate and on-site personnel, they
are not able to expand quickly into new geographic regions. Personnel costs
also limit the number of hours during which store-based retailers may operate,
thereby limiting customer access and convenience. Additionally, store-based
retailers face challenges in hiring, training and retaining knowledgeable sales
staff conversant and up-to-date on the broad array of hardware and software
products.
Catalog retailers offer their customers the convenience of shopping from
home or the office and more flexible hours of operation, but they are still
constrained by catalog mailing, printing and associated expenses as to the
number of SKUs they can feature and the amount of product information they can
provide. The Company believes that a typical catalog retailer carries up to
40,000 SKUs, but typically only features 2,000 - 3,000 SKUs in any single
catalog. Furthermore, the entire catalog shopping experience is, in general,
neither interactive nor personalized, yet requires extensive personnel support
and manual intervention on behalf of the retailer to take and process orders.
The Company also believes that many catalog retailers focus primarily on the
corporate marketplace.
The Company believes that the business model of the traditional retailer
results in inefficiencies that are exacerbated by, among other things, the broad
array of products and the rapidly changing world we live in. The Company
believes that Internet-based retailers are well positioned to solve and
capitalize on these inefficiencies.
ANYTHING INTERNET'S SOLUTION
The Company understands the key business challenges of the retailing
industry and has adapted to the unique environment of the Internet to address
those and anticipated future challenges. The Company believes that the key
operating advantages of its Internet storefronts and e-commerce in general are:
Attractive Economics of the Internet Storefront -- As an Internet-only retailer,
the Company is not constrained by the inherent limitations of store- and
catalog-based retailers. The Company enjoys structural economic advantages
relative to traditional retailers, including:
- - low-cost and essentially unlimited shelf space;
- - flexible advertising and affordable merchandising opportunities;
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- - lower personnel requirements;
- - scaleable technology and systems that can serve a fast-growing customer
base; and
- - the ability to serve a worldwide customer base from a single, domestic
location.
The Company intends to leverage its Internet storefronts, content provided,
marketing and technology over a growing global customer base resulting in
substantial economies of scale that the Company believes should enable it to
achieve greater operating margins, product diversification and, ultimately,
levels of profitability compared to tradition retailers.
Customer Convenience -- The Company provides enhanced customer convenience by
enabling customers to purchase products from either their home or office 24
hours a day, seven days a week. The Company believes that customers may buy
more items because they have more hours to shop, can act immediately upon
impulse, and can readily locate items that are difficult to find in retail
stores or catalogs.
Selection -- Because the Company's shelf space is low-cost and virtually
limitless, the Company is able to offer some of the most comprehensive
selections of products available. To offer such a large selection would be
economically and physically impractical to stock in a retail store or publish in
a mail-order catalog. For example, through its wholly-owned subsidiary
AnythingPC Internet Corporation, the Company currently offers more than 175,000
computer hardware, software and peripheral products.
Low-Cost Distribution Channel for Manufacturers -- Unlike traditional store or
catalog retailers that often charge manufacturers for "shelf space", the Company
can offer the same manufacturers electronic "shelf space" with no up-front cost.
This benefits the Company in better margins on certain products, the
manufacturer gains additional retail presence with no up-front costs, and the
buyer gets access to desired products at extremely competitive price.
Customer Service -- The inherent nature of the Internet allows for improved pre-
and post-sales support via both e-mail and telephone. Customers may inquire
about the status and tracking of their orders via the Company's Internet
storefronts. Also, customers can choose to be notified automatically when a
backordered product they desire has arrived in stock and is available for
shipment.
Worldwide Customer Base -- Because the Internet is worldwide in scope, the
Company can offer its entire product line to customers in domestic,
international, urban and rural locations where finding the product desired by
the customer is not always a simple task.
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STRATEGY
The Company's objective is to become the first true e-commerce
conglomerate. The Company intends to capitalize on and extend its market
position as one of the first-mover e-commerce companies through the following
key strategies:
Building Brand Awareness -- The Company believes that building brand awareness
of its Internet storefronts is critical to attracting and expanding its customer
base. The Company intends to continue building brand awareness and expanding
its customer base through various marketing methods, including:
- - building strategic alliances with various Internet content providers and
sites of interest;
- - Internet marketing campaigns, including both general and direct
advertising;
- - creating as many general and specific "links" to the Company's various
Internet storefronts as possible;
- - targeted non-Internet marketing programs aimed at generating sales from
consumers and businesses; and
- - specialized programs, including "personalization" features, directed
towards building repeat business from existing customers.
Promote Repeat Purchases -- The Company's strategy is to build customer loyalty
and thereby promote repeat buying by providing enhanced product information to
consumers, efficient site navigation and search capabilities, personalized
services and targeted communications and promotions, and a broad range of
immediately available products.
Leverage and Further Develop Strategic Relationships -- The Company intends to
continue to leverage its strategic marketing alliances with popular portals and
sites of interest such as C|Net's Shopper.com, mySimon.com, Priceline.com and
bottomdollar.com and technology enablers such as Digital River, Inc. (NASDAQ:
DRIV) to enhance its Internet storefronts' technology, expand brand recognition
and increase site traffic and subsequent customer sales. The Company also
intends to expand its online visibility and may enter into relationships with
additional Internet access providers, search engines and other high-traffic
Internet sites.
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Maintain Technology Focus and Expertise -- The Company intends to continue
maximizing the unique efficiencies of the Internet, such as the ability to make
changes in merchandising and content in real-time and at low cost, to:
- - increase merchandising effectiveness;
- - personalize the customers' experiences; and
- - improve operating efficiencies.
The Company is currently developing systems and technologies to personalize
visitors' shopping and post-shopping experiences. By targeting content and
promotions such as e-mails, newsletters and store advertising, the Company can
deliver more compelling promotional programs. The Company also intends to use
such technology to lower transaction costs and improve the customer's online
shopping experience through:
- - the automation of customer service functions such as automated e-mail
responses and online in-stock status;
- - product management such as using automation to update the product
databases and create upsells and links to product reviews; and
- - communications with suppliers for purchasing and automating payment
methods for accounting.
Strengthen First-Mover Advantages -- The Company believes that significant
barriers exist that are making it increasingly difficult to enter the online
computer products marketplace in a cost-effective manner. These barriers
include:
- - the necessary up-front investment in technology and technical
infrastructure, such as that required for real-time processing of both
payment and order fulfillment. International Data Corporation, a market
research firm, recently reported on average that it costs an average of
$6 million to establish a new e-commerce site plus an average of
$13 million annually to maintain and promote it;
- - the time and expense required to build a brand that effectively draws
customers to an Internet site;
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- - the time, expense and expertise necessary to develop publisher and
distributor relationships; and
- - the need to develop strategic alliances with high-traffic, high-profile
Internet sites.
The Company intends to extend its first-mover advantages in each of these
areas.
ANYTHINGPC INTERNET CORPORATION
AnythingPC Internet Corporation, a wholly-owned subsidiary of the Company,
is a rapidly growing Internet based discount retailer of over 175,000 different
computer hardware, software and peripheral products to end consumers and
businesses. Through its Internet storefronts - www.anythingpc.com,
www.anythingmac.com, and www.anythingunix.com - AnythingPC offers one-stop
shopping to its customers 24 hours a day, seven days a week. In addition to its
wide array of product offerings, AnythingPC's storefronts feature competitively
priced "Hot Products", an easy-to-use graphical interface, a powerful search
engine to locate any product desired, a unique "quote monkey" for pricing
assistance on hard-to-find products, and a special "notify me" feature that
automatically notifies customers when a backordered product arrives in stock and
keeps the customer appraised of the estimated time of arrival.
The growth and acceptance of selling computer hardware, software and
peripherals via Internet e-commerce has been surprisingly fast. AnythingPC made
its first e-commerce sale in December 1997. Since then its monthly revenues
have climbed to more than $400,000.
AnythingPC's Storefronts
Customers access AnythingPC's Internet storefronts through
www.anythingpc.com, www.anythingmac.com or www.anythingunix.com and are
presented with a simple, intuitive and easy to use graphical interface.
AnythingPC has learned that customers entering the storefronts generally fall
into one of two categories:
- - they are looking for specific product and wish to purchase it quickly and
at a competitive price; or
- - they are browsing the store and seeking an entertaining and informative
shopping experience.
AnythingPC's Internet storefronts are designed to satisfy both types of
customers. Just like a physical retail store, customers can browse the
departments of the store, search for specific needs, view promoted products,
obtain product information, order products, and ask for customer service.
Unlike the traditional retail store, this can all be accomplished from the
comfort and convenience of the customer's home or office.
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Shoppers purchase products by simply clicking on a button to add products
to their "virtual" shopping baskets. Customers can add and/or subtract products
from their shopping baskets as they browse, prior to making a final purchasing
decision, just as in a physical retail store. To execute orders, customers
click on the buy button and are prompted to supply shipping and, in the case of
consumers, credit card details, either by e-mail or by telephone. The store
design enables purchasers to buy several products at once, rather than having to
repeat the same purchase process for each desired product. All customer
information is stored on the Company's secure server and is used to enhance
subsequent shopping experiences by the repeat customer and better enable the
AnythingPC to target special promotions. This process is highly automated, but
AnythingPC does accept orders, questions and requests for product information
via the telephone for those customers who are concerned about sending credit
card information over the Internet.
MARKETING AND PROMOTION
The Company's marketing strategy is to promote, advertise and increase its
brand visibility to attract new customers through multiple channels, including:
- - developing strategic alliances with major portal sites;
- - advertising on leading Internet sites and other media worldwide;
- - expanding the Company's affiliates network and linking programs; and
- - direct marketing to existing and potential customers.
The Company believes that the use of multiple marketing channels reduces
reliance on any one source of customers, lowers customer acquisition costs, and
maximizes brand awareness.
Strategic Alliances -- The Company pursues strategic relationships to expand the
Company's online presence, increase its access to online customers, expand brand
recognition, and enhance the underlying technology of its Internet storefronts.
In pursuing these relationships, the Company seeks exclusive or semi-exclusive
positioning for the sales of computer related products on key screens of major
Internet sites. To date, the Company has established successful strategic
alliances with companies such as C|Net's Shopper.com, mySimon.com,
Priceline.com, bottomdollar.com and Digital River, Inc. (NASDAQ: DRIV).
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Online Advertising -- In addition to its primary strategic alliances, the
Company utilizes numerous online sales and marketing techniques to increase
brand recognition and drive traffic to the Company's Internet storefronts,
including banner advertising on various high-traffic Internet sites. Such
banner advertisements can be permanently displayed for designated periods of
time or displayed when a user searches for information relating to certain
keywords (ie. "printers" or "software").
Direct Marketing -- The Company believes that the demographics of Internet users
overlap one-to-one with the demographics of potential customers, especially
those seeking to purchase new computer hardware, software and peripheral
products. The Company believes that the Internet provides additional
opportunities for direct marketing to the Company's customers through a variety
of mechanisms, and is exploring such direct marketing opportunities to target
new and existing customers with customized offers such as an e-mail newsletter,
special product offers and preferred customer offers.
Linking -- The Company believes it is important to create as many Internet
"links" to its Internet storefronts as possible. The Company has begun an
aggressive program to increase the number of links from search engines,
manufacturers' Internet sites, community, affinity and basic home pages.
Customer Service -- The Company believes its ability to establish and maintain
long-term relationships with its customers and encourage repeat visits and
purchases depends, in part, on the strength of its customer support and service.
Customer support and service personnel are responsible for handling general
customer inquiries, answering customer questions about the ordering process, and
investigating the status of orders, shipments and payments. The Company has
automated some of the tools used by its customer support and service staff,
including the tracking screens that enable its support staff to track a
transaction by any of a variety of information sources. At any point in the
purchasing process, customers can access the Company's support staff by e-mail,
fax or telephone. Customers who are reluctant to enter their credit card
numbers through the Internet site are also invited to call the Company directly
for purchases. The Company currently employees a growing staff of dedicated
customer support and service personnel.
TECHNOLOGY AND SYSTEMS
The Company uses complex proprietary and commercially licensed technology
to make both the customer experience and the management reporting process as
seamless and simple as possible with minimal human intervention necessary. To
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that end, the Company has developed technologies and systems to support
scaleable, flexible and seamless online reselling in a secure and easy to use
manner. By using a combination of proprietary and commercially available
technologies, the Company has deployed systems for online content dissemination,
online transaction processing, customer service, market analysis and electronic
data interchange.
Scaleability and Flexibility -- The architecture of the Company's hardware and
software is built upon a distributed transaction-processing model which allows
the process load to be distributed among multiple parallel servers. This
architecture allows the Company to scale by either adding new servers or
increasing the capacity of existing servers. The Company's hardware and
software configuration is designed to scale to support growth while maintaining
user performance and minimizing the cost per transaction. In the rapidly
changing Internet environment, the ability to update this system in order to
stay current with new technologies is important. The system's template
technology and modular database design allow the addition or replacement of
software components, page layout templates, and search and retrieval engines
with minimal effort and disruption. This architecture also enables low-cost,
rapid deployment of additional, co-branded Internet sites that integrate with
the Company's other Internet storefronts.
Seamlessness -- The Company's multiple hardware and software systems integrate
seamlessly to manage real-time transactions with limited human intervention.
Orders for products are routed to the appropriate contact person or distributor
while the customer's credit card is charged. Orders requiring human
intervention are automatically routed for processing by a customer service
representative.
Store Engine Architecture -- The Company's hardware and software systems are
based upon a distributed transaction-processing model that allows applications
and data to be distributed among multiple parallel servers. Many of the
software components, and the pages of the Company's Internet storefronts, are
developed in a manner that enables the separation of the page look and feel from
the individual data elements and their associated database lookups. This
separation permits frequent changes to product pricing information, reduces
software and database updates for Internet site changes, and minimizes the
engineering required to maintain a growing number of items and content. The
Company utilizes technology that also enables Internet storefronts with
different formats to integrate various elements such as search, vendor and
product pages. This technology allows the Company to maintain several Internet
storefronts over a single order processing and customer service system.
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Data Warehouse -- The Company utilizes a database management system to index,
retrieve and manipulate product information, content, product catalogs, orders
and transaction and customer information. This system allows for rapid
searching, sorting, viewing and distribution of a large volume of content. The
Company deploys a data warehouse that enables it to access detailed transaction
and customer interaction data and perform proprietary market analysis. The data
warehouse provides a unified platform for the store engine and other components.
This data warehouse system incorporates commercially available hardware and
software combined with proprietary software of the Company in a configuration
developed internally.
Customer Reassurance -- A critical issue to the success of online retailing is
maintaining the integrity of information, particularly the security of customer
information such as credit card numbers. The Company believes that its existing
security systems are at least as secure as those used for traditional retail
store transactions and that it has a comprehensive security strategy. The
Company's system automatically monitors each purchase and confirms each order by
e-mail to the customer within minutes after the order is placed.
Fault Tolerance and Scaleable Internet Access -- The Company's systems are
designed for automatic transfer to "hot" spare systems in the event of failure
and are equipped with fully automated reporting tools. These tools provide
automated trouble notification and detailed event logging. A load distribution
system monitors traffic to each server. Should a system fail to respond to a
request, the automated distribution system will redistribute traffic among the
remaining machines with no loss of user functionality. In addition, the Company
maintains redundant servers in both California and Colorado to further minimize
the chance of loss or system disruption.
Notwithstanding these precautions, there can be no assurance that either
the security mechanisms of the Company's Internet provider, the Company, or the
Company's other suppliers will prevent security breaches or service breakdowns.
Despite the implementation of network security measures by the Company, its
servers may be vulnerable to computer viruses, physical or electronic break-ins,
and other disruptions that could lead to interruptions, delays, loss of data, or
the inability to accept and fulfill customer orders and could have a material
adverse effect on the Company's finances, prospects, financial condition and
results of operation.
COMPETITION
The realm of Internet e-commerce is new, rapidly evolving, and intensely
competitive. Current and new competitors can launch new sites at a relatively
low cost. At the present time, the Company primarily competes with other
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companies at a divisional level. However, the Company currently or potentially
competes with the following companies sharing similar overall visions and
Internet strategies:
- - Amazon.com (NASDAQ: AMZN) is known, or branded, as a book seller has
recently expanded into videos, CDs, prescription drugs and auctioning
products. They are anticipated to continue growing and diversifying over
the coming months and years;
- - Buy.com, a closely held company, is primarily known for selling computer
hardware, software and peripheral products, but has recently expanded
into books, videos, games, and CDs; and
- - CMGI, Inc. (NASDAQ: CMGI) is a developer and operator of Internet and
direct marketing companies. CMGI takes strategic equity positions in
Internet businesses, including Lycos, Inc. (NASDAQ: LCOS), Amazon.com
and Hollywood Entertainment Corporation (NASDAQ: HLYW).
AnythingPC competes directly with the computer products retail industry which is
intensely competitive. Through AnythingPC, the Company currently or potentially
competes with a variety of other companies. These competitors include:
- - various traditional computer retailers including CompUSA and MicroCenter;
- - various mail-order retailers including CDW, MircoWarehouse, Insignt, PC
Connection and Creative Computers;
- - various Internet-focused computer retailers including Egghead.com,
beyond.com, Cyberian Outpost and BuyComp.com;
- - various manufacturers that sell directly over the Internet including Dell,
Gateway and Apple;
- - a number of online service providers including America Online and the
Microsoft Network that offer computer products directly or in partnership
With other retailers;
- - some non-computer retailers such as Wal*Mart that sell a limited selection
of computer products in their stores; and
- - computer products distributors which may develop direct channels to the
consumer market.
45
<PAGE>
Increased competition from these and other sources could require the
Company to respond to competitive pressures by establishing pricing, marketing
and other programs or seeking out additional strategic alliances or
acquisitions, any of which could have a material adverse affect on the business,
prospects, financial condition and results of operations of the Company.
The Company believes that the principal competitive factors in its market
are brand recognition, selection, price, variety of value-added services, ease
of use, site content, fulfillment, reliability, quality of search tools,
customer service and technical expertise. Many of the Company's current and
potential competitors have longer operating histories, larger customer bases,
greater brand recognition, and significantly greater financial, marketing and
other resources than the Company. In addition, online retailers may be acquired
by, receive investments from, or enter into other commercial relationships with
larger, well-established and well-financed companies as use of the Internet and
other online services increases. The Company is aware that certain of its
competitors have and may continue to adopt aggressive pricing or inventory
availability policies and devote substantially more resources to Internet site
and systems development than the Company. Increased competition may result in
reduced operating margins, loss of market share, and a diminished brand
franchise, any of which would have a material adverse effect on the Company.
Moreover, companies that control access to transactions through network access
or Web browsers currently promote, and will likely continue to promote,
competitors of the Company. There can be no assurance that the Company will be
able to respond effectively to increasing competitive pressures or to compete
successfully with current and future competitors.
INTELLECTUAL PROPERTY
The Company claims common law trademark for its logo, corporate name, and
Internet storefronts - AnythingPC, AnythingMAC and AnythingUNIX. The Company
also has reserved the rights to hundreds of Internet domain names, including
www.anythinginternet.com, www.anythingpc.com, www.anythingmac.com,
www.anythingunix.com and www.anythingcellular.com.
EMPLOYEES
The Company believes its success depends to a significant extent on its ability
to attract, motivate and retain highly skilled management and employees. To
this end, the Company focuses on incentive programs such as employee stock
options and competitive compensation and benefits packages for its employees to
foster a corporate culture which is challenging and rewarding, yet fun. As of
April 22, 1999, the Company, including its subsidiaries, had nine employees:
46
<PAGE>
eight full-time and one part-time. Currently full-time employees receive health
and dental plans after 90 days of employment. The Company also employs, from
time to time, a limited number of independent contractors and temporary
employees on a periodic basis. None of the Company's employees are represented
by a labor union and the Company considers its labor relations to be good.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Fiscal Year 1998 Ending June 30, 1998
The Company was incorporated under the laws of the State of Colorado on
August 15, 1997. June 30, 1998 marked the end of the Company's first fiscal
year, which, as a result of the ending day of the fiscal year, was a short year
for the Company.
Net sales for the fiscal year ending June 30, 1998 were $657,988. All of
these sales were a result of the Company establishing its first Internet
storefronts and generating initial customer traffic and orders through these
Internet storefronts.
Gross profits for the fiscal year ending June 30, 1998 were $44,666, or
6.8% of sales. Gross profit margins for Internet retailers have historically
been significantly lower than traditional brick-and-mortar retailers as a result
of the deep price discounts typically offered to Internet customers.
Selling, general and administrative (SG&A) expenses for the fiscal year
ending June 30, 1998 were $69,428. The major components of these expenses for
the fiscal year were the acquisition costs of office and computer equipment and
software development costs.
The net loss for the fiscal year ending June 30, 1998 amounted to $24,762,
or $4.27 a share. There were 5,800 shares issued and outstanding as of June 30,
1998, on both a basic and fully diluted basis. The net loss was primarily
attributable to expensing initial start-up costs.
Nine-Months Ended March 31, 1999 Compared to Nine-Months Ended
March 31, 1998
Net sales for the nine-months ended March 31, 1999 were $2,403,629, an
increase of 2,325% over $99,136 for the same period a year ago. The increase in
net sales was driven primarily by increasing customer awareness of the Company's
Internet storefronts, building brand awareness, improving Internet storefront
content, and continuing to increase the number of products available through its
Internet storefronts to more than 175,000 different computer hardware, software
and peripheral products. In addition, as of March 31, 1999 the Company had sold
products to approximately 8,654 unique customers.
47
<PAGE>
Gross profits for the nine-months ended March 31, 1999 were $92,226, or
3.8% of sales, compared to $5,514, or 5.6% of sales, for the same period a year
ago. The increase in gross profit was due to increased product sales as
discussed above and improved product and inventory management.
Selling, general and administrative (SG&A) expenses for the nine-months
ended March 31, 1999 were $430,397, an increase of 2,266% over $18,990 for the
same period a year ago. The dollar increase in SG&A over the prior same period
is the result of additional costs incurred in handling higher order volumes,
increased computer and technology acquisitions for handling increase Internet
storefront traffic and opening the Tampa, Florida business-to-business sales and
support office.
The net loss for the nine-months ended March 31, 1999 was ($377,861), or
($0.12) a share, an increase of 2,804f% over ($13,477), or ($1.35) a share, for
the same period a year ago. The increase in net loss is attributable to
increased SG&A expenses and on-going capital expenditures.
The Company does not believe that inflation has had a material adverse
effect on sales or income since its inception on August 15, 1997. Increases in
product or other operating costs may adversely affect the Company's operations;
however, the Company believes it will be able to maintain its present gross
profit margins by monitoring and adjusting the prices of the products it sells
to offset increases in costs of goods sold or other operating costs.
Based on its experience to date, the Company believes that its future
operating results may be subject to quarterly variations based on a variety of
factors, including seasonal buying patterns in the computer industry. Such
effects may not be apparent in the Company's operating results during a period
of expansion. However, the Company can make no assurances that its business can
be significantly expanded under any circumstances.
Liquidity and Capital Resources
The Company's operations to date have concentrated on developing its
Internet storefronts, building brand recognition and a loyal customer following,
and securing the financing necessary to fund the development, operations and
expansion of its business.
48
<PAGE>
As of March 31, 1999, the Company had $18,973 cash on hand, accounts
receivable, including some "term" sales, of $138,544, and receivable notes of
$86,023. The Company also had bank credit lines aggregating $85,000 with
$52,865 available for immediate usage. In addition, the Company had several
supplier-based revolving lines of credit, including Tech Data, $150,000; Ingram
Micro, $150,000 (as of April 22, 1999, the Company was in discussions with both
Ingram Micro and Tech Data to increase its respective credit lines further);
Merisel, $65,000; and Pinacor, $5,000. Additionally, Reseller Credit
Corporation finances corporate purchase orders on behalf of the Company for
products supplied by Ingram Micro.
As of March 31, 1999, cash used by operating activities, since its
inception on August 15, 1997, totaled ($228,129). The majority of the cash flow
used in these operating activities was the result of SG&A expenses and initial
business start-up costs.
As of March 31, 1999, cash used by investing activities, since its
inception on August 15, 1997, totaled ($112,797). All of these investments were
in office equipment, technology and software development.
As of March 31, 1999, cash provided by financing activities, since its
inception on August 15, 1997, totaled $359,900. The majority of this financing
was the result of borrowing activities, utilizing credit facilities, and
completing a successful private placement in December 1998 which yielded net
proceeds of $200,000.
The Company expects to continue making significant investments in the
future to support its overall growth. Currently, it is anticipated that ongoing
operations will be sufficiently financed from the net proceeds of the
anticipated exercise of the Warrants the Common Stock being registered herein
underlie, cash on hand, accounts receivable, the various credit facilities
available to the Company, and from internally generated funds. However, as
indicated in the Company's most recent financial statements available herein,
while operating activities provide some cash flow, the Company is currently cash
flow negative. There can be no assurances that the Company's ongoing operations
will begin to generate a positive cash flow or that unforeseen events may not
require more working capital than the Company currently has at its disposal.
49
<PAGE>
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. This could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. The Company utilizes third-party equipment and software that it
believes is Year 2000 compliant. The Company is in the early stages of
conducting an audit of its third-party suppliers as to the Year 2000 compliance
of their systems. The Company does not believe it will incur significant costs
in order to comply with Year 2000 requirements. However, failure of the
Company's internal computer systems or of such third-party equipment or
software, or of systems maintained by the Company's suppliers, to operate
properly with regard to the Year 2000 and thereafter could require the Company
to incur unanticipated expenses to remedy any problems, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DESCRIPTION OF PROPERTY
The Company maintains its headquarters in Colorado Springs, Colorado at 3020
North El Paso in a 2,069 square foot office space through a one-year lease that
commenced on June 3, 1998. The Company pays $1,280 a month, utilities included,
for this leased office space.
The Company also has a business-to-business sales and support office
located in Tampa, Florida. This facility encompasses approximately 1,093 square
feet and is secured by a one-year lease that commenced on February 1, 1999. The
Company pays $1,275.16 a month, utilities included, for this leased office
space.
CERTAIN TRANSACTIONS
On August 22, 1998, the Company entered into a Share Exchange Agreement
with Banyan Corporation, a publicly traded company listed on the OTC Electronic
Bulletin Board under the trading symbol "BANY". Under the terms of the Share
Exchange Agreement, the Company caused the issuance of 1,000,000 shares of its
Common Stock to Banyan pursuant to exemptions under Section 4(2) of the
Securities Act and Regulation D thereunder in exchange for 200,000 shares of
Banyan Common Stock, issued pursuant to exemptions under Section 4(2) of the
Securities Act and Rule 144 thereunder. The then market price for Banyan's
Common Stock was $0.20 a share, resulting in an effective price of four cents a
share for the Company's Common Stock.
50
<PAGE>
In addition to the shares of Banyan Common Stock received, the Company was also
granted options to purchase 300,000 additional shares of Banyan Common Stock,
vested immediately, as follows: 100,000 shares at 50 cents a share, expiring
February 28, 1999; 100,000 shares at $1.00 a share, expiring August 31, 1999;
and 100,000 shares at $2.00 a share, expiring August 31, 2000.
As part of the Share Exchange Agreement, Banyan was empowered to appoint
two Directors to the Company's Board of Directors. Banyan appointed its
President and Chief Executive Officer, Cameron B. Yost, and its outside
management and financial consultant, J. Scott Sitra.
Subsequent to the Share Exchange Agreement, the Company elected to
reclassify itself from an Internal Revenue Service subchapter "S" corporate
classification to a subchapter "C" corporate classification and transition the
closing day of its fiscal year from December 31st to June 30th.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Prior to the filing of this Registration Statement there has been no market
for the Company's Common Stock, and there can be no assurance that a liquid and
active market will ever develop, or if developed, that it will be sustained.
Application is being made for the quotation of the Company's Common Stock on the
OTC Electronic Bulletin Board market under the proposed trading symbol "ANYI."
The initial trading price of the Company's Common Stock, once it is
approved for trading, will be determined by the negotiation between the Company
and the initial Market Maker posting bid and ask quotations for the Company's
Common Stock, and will not necessarily bear any direct relationship to the
Company's assets, earnings, book value or other generally accepted criteria of
value.
As of January 25, 1999, the Company had approximately 176 shareholders of
record. This does not include shareholders who hold stock in their accounts at
broker-dealers.
DIVIDEND POLICY
The Company has never declared or paid any dividends on its capital stock.
The Company currently intends to retain all available funds and any future
earnings of its business for use in the operation of its business and does not
anticipate paying any cash or other dividends in the foreseeable future. The
51
<PAGE>
declaration, payment and amount of future dividends, if any, will depend upon
the future earnings, results of operations, financial position and capital
requirements of the Company, among other factors, and will be at the sole
discretion of the Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
The Company is authorized to issue up to 50,000,000 shares of its Common
Stock. If all warrants, stock options, and Employee Stock Ownership Program
reserves are exercised and released, the Company would have 4,086,000 shares
issued and outstanding (fully diluted basis). In such an event, the Company
would have approximately 45,914,000 shares of authorized, but unissued, Common
Stock available for issuance without further shareholder approval. Any issuance
of additional shares of Common Stock may cause current shareholders to suffer
significant dilution, which may adversely affect prevailing market prices,
should a market for the Company's Common Stock ever develop.
Additionally, in the event a market does develop for the Company's Common
Stock, future sales of substantial amounts of Common Stock into the public
market could adversely affect any prevailing market prices and the Company's
ability to raise equity capital in the future.
As of April 22, 1999, the Company had 3,074,400 shares of Common Stock
issued and outstanding. Of these shares, 500,400 shares are currently
restricted from resale pursuant to Section 4(2) of the Securities Act and Rule
144 thereunder. Subject to the volume and other restrictions of Rule 144,
185,000 of these shares become eligible for sale on August 22, 1999; 400 of
these shares become eligible for sale on January 10, 2000; and 315,000 of these
shares become eligible for sale on August 22, 2000.
As of April 22, 1999, the Company had the following options to purchase
shares of Common Stock outstanding:
<TABLE>
<CAPTION>
No. of Options Exercise Price Vesting Period Expiration Date
- -------------- -------------- -------------- ---------------
<C> <C> <S> <C>
500,000 $ 1 Fully Vested February 29, 2000
50,000 $ 40 Fully Vested April 1, 2002
25,000 $ 75 Fully Vested April 1, 2002
25,000 $ 100 Fully Vested April 1, 2002
10,000 $ 3 Three Years March 31, 2003
- ---------------
610,000
</TABLE>
52
<PAGE>
The Company has not filed any registration statements with the SEC to
register any of the Common Stock underlying any of these options. The Company
anticipates filing a Form S-8 registration statement with the SEC in the future
to register the Common Stock underlying these options, but until it files such a
registration statement any shares of Common Stock issued to exercising option
holders will be subject to the resale restrictions of Rule 144.
On January 10, 1999, the Company set aside a reserve of 200,000 shares of
Common Stock to establish an Employee Stock Ownership Program (ESOP). As of
January 25, 1999, no shares had been issued or authorized for issue under the
Company's ESOP. While it is anticipated this reserve will be sufficient to
satisfy the needs of the Company's ESOP for the next several years, it is
possible the Company could use the entire reserve at any time. Common Stock
issued to employees through the Company's ESOP may or may not have any
restrictions attached thereunder.
In addition, because the 800,027 shares of Common Stock held by Banyan
Corporation equates to an ownership level exceeding 10% of the total issued and
outstanding shares of the Company's Common Stock, it is deemed a "control
person" as defined in the Securities Act. While the shares of Common Stock
owned by Banyan are not subject to any trading restrictions per se, control
persons are always subject to the volume restrictions on sales of their holdings
as defined in Rule 144 of the Securities Act. As such, Banyan may be limited to
the number of shares it may sell during any given future period of time.
In general, under Rule 144 as currently in effect, an affiliate of the
Company or person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least one year (two years for insiders) will be
entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) one percent of the then outstanding shares of the
Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock during the four calendar weeks immediately preceding the
date on which notice of the sale is filed with the SEC. Sales made pursuant to
Rule 144 are subject to certain requirements relating to manner of sale, notice
and the availability of current public information about the Company. A person
(or persons whose shares are aggregate) who is not deemed to have been an
affiliate of the Company at any time during the 90 days immediately preceding
the sale and who has beneficially owned the shares for at least two years is
entitled to sell such shares under Rule 144(k) without regard to the limitations
described herein.
53
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On September 1, 1998, the Company engaged J. Paul Kenote, CPA, P.C. as its
independent public accountants. The Company had no prior independent auditor.
RECENT DEVELOPMENTS
On April 1, 1999, the Company underwent a restructuring whereby it placed
its three operating Internet storefronts - www.anythingpc.com,
www.anythingmac.com and www.anythingunix.com - into a wholly-owned subsidiary,
AnythingPC Internet Corporation. As part of this restructuring, the Company's
Board of Directors elected J. Scott Sitra as its new President and Chief
Operating Officer and elected its former President, Robert C. Schick, as the
Company's new Chief Technology Officer while appointing him President and Chief
Executive Officer of the new AnythingPC division.
Mr. Sitra's first year compensation package consists of a salary of
one-dollar ($1) and options to purchase 100,000 shares of Common Stock at the
following exercise prices: 50,000 at $40 a share, 25,000 at $75 a share and
25,000 at $100 a share.
On April 13, 1999, the Company formally established a new
business-to-business sales office in Tampa, Florida. The purpose of this
facility is to focus on emerging business-to-business sales opportunities and
relationships as more businesses shift their buying patterns to the Internet to
maximize new buying efficiencies and lower costs. The facility is headed by
Rich Baron, General Manager.
54
<PAGE>
FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 1998 FOR THE FISCAL YEAR ENDING JUNE
30, 1998
CONTENTS
Independent Auditor's Report F-1
Balance Sheet F-3
Statement of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statement of Cash Flows F-6
Notes to Financial Statements F-7
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Anything, Inc.
Colorado Springs, Colorado
We have audited the accompanying balance sheet of Anything, Inc. as of June 30,
1998 and the related statements of operations, changes in shareholders' equity
and cash flows for the period from August 15, 1997 to June 30, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements referred to above present, in all
material respects, the financial position of Anything, Inc. at June 30, 1998 and
the results of their operations and their cash flows for the period beginning
F-1
<PAGE>
August 15, 1997 to June 30, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company is attempting to establish itself as a player
in a very competitive market. It also has a substantial need for cash to
finance its development stage and ongoing activities. These and other factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in
Note 6. The accompanying financial statements do not include any adjustments
relating to the recover ability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
/s/ J. Paul Kenote
J. PAUL KENOTE, CPA, P.C.
Portland, Oregon
December 21, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
ANYTHING, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 1998
ASSETS
Current assets:
- ---------------
<S> <C>
Cash $ 42,114
--------
Accounts receivable, trade 14,591
--------
56,705
--------
Furniture and fixtures:
Office furniture and equipment 14,461
--------
Less accumulated depreciation 2,892
--------
11,569
--------
Other assets:
Software development costs, net of
Accumulated amortization of $4,088 21,984
--------
Deposits 1,380
--------
23,364
--------
$ 91,638
========
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ANYTHING, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
<S> <C>
Notes payable (Note 2) $ 25,500
Note payable - line of credit (Note 3) 32,038
Accounts payable, trade 17,441
Accrued expenses 5,221
----------
80,200
----------
Commitment (Note 4)
Stockholders' equity:
Common stock, no par value,
1,000,000 shares
Authorized; 5,800 issued
and outstanding 36,200
Deficit accumulated during
development stage (Note 6) (24,762)
----------
11,438
----------
$ 91,638
=========
</TABLE>
<TABLE>
<CAPTION>
ANYTHING, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
For the Period From August 15, 1997 to June 30, 1998
<S> <C>
Sales $ 657,988
Cost of sales 613,322
---------
Gross margin 44,666
Selling, general and administrative expenses 69,428
---------
Excess of expenditures over revenues before
income tax benefit (24,762)
Income tax benefit (Note 5) -
---------
Net loss for the period ($24,762)
=========
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ANYTHING, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period From August 15, 1997 to June 30, 1998
Common Stock Issued
--------------------- Retained Total
Number Amount Deficit Equity
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at August 15, 1997 - $ - $ - $ -
Sales of common stock 5,800 36,200 - 36,200
Net loss for the period (24,762) (24,762)
--------- --------- --------- ---------
Balance at June 30, 1998 5,800 $ 36,200 ($24,762) $ 11,438
========= ========= ========= ===========
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
ANYTHING, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Period From August 15, 1997 to June 30, 1998
<S> <C>
Cash flows from operating activities:
Net operating deficit ($24,762)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization expense 6,980
Net changes in operating assets
and liabilities:
Accounts receivable (14,591)
Deposits (1,380)
Accounts payable and accrued expenses 22,662
---------
Net cash used by operations (11,091)
---------
Cash flows from investment activities:
Acquisition of office equipment (14,461)
Software development costs incurred (26,072)
---------
Net cash used by investment activities (40,533)
---------
Cash flows from financing activities:
Proceeds from borrowing 57,538
Sale of stock 36,200
---------
Net cash provided by financing activities 93,738
---------
Net cash increase 42,114
Cash at beginning of the period -
---------
Cash at end of the period $ 42,114
=========
Supplemental schedule of non-cash
financing transactions:
Issuance of 830 shares of common
stock for software
development services $ 16,600
=========
</TABLE>
F-6
<PAGE>
ANYTHING, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND LINE OF BUSINESS:
Line of business:
Anything, Inc. was organized on August 15, 1997 as a Colorado corporation to
market and distribute computers and related accessory products by using the
Internet as the exclusive distribution channel.
Software Development Costs:
It is the Company's policy to capitalize major software development
activities to reflect the value of the software over its anticipated useful
life. The Company amortizes this software over a three year period from the
implementation of the software.
Revenue Recognition:
The Company recognizes income when product is shipped to customers either
from the Company's inventory or when shipped from distributors' warehouses
directly to the customer. The Company assumes the title to the product when it
is shipped either to the Company or directly to the Company's customer.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
NOTE 2 - NOTES PAYABLE:
Notes payable consist of the following:
Note payable to a former shareholder of the Company
in exchange for the redemption of his stock. The note is
to be paid in four unequal installments, is non-interest
bearing and is personally guaranteed by the principal
F-7
<PAGE>
shareholder of the Company. (The shareholders' 4,200 shares
of stock were retired immediately by the Company's Board
of Directors.) $15,000
Note payable to the parents of the principal shareholder of
the company, bearing interest at 8% per annum and due on
or before December 31, 1998. The note is unsecured. 10,500
-------
$25,500
=======
NOTE 3 - LINE OF CREDIT
To help finance the cost of inventory, Nations Credit Distribution Finance, Inc.
has extended the Company, a credit line not to exceed $35,000. The interest
rate applicable to each transaction will depending upon the vendor and the
timeliness of repayment and will range from 0% to 18%. The credit line is
unsecured.
NOTE 4 - OBLIGATION UNDER LEASE COMMITMENT:
The company leases approximately 2,000 square feet of office space under a
non-cancelable lease agreement expiring May 31, 1999. The lease can be extended
based on terms and conditions to be established at that time. The lease payment
in comprised of a scheduled monthly base payment plus personal property taxes,
insurance and utilities.
Future minimum annual lease payments are as follows:
Years Ending
June 30, Amount
-------- ------
1999 $ 14,080
-------
$ 14,080
=======
Lease expense incurred for the period from August 15, 1997 to June 30, 1998 was
$4,244.
NOTE 6 - CONTINUED OPERATIONS
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
company as defined in Financial Accounting Standard No. 7, Accounting and
Reporting by Development Stage Enterprises (FAS-7). It is devoting
substantially all of its effort to raise capital, developing markets and
training personnel in order to generate significant operations. It is not
certain that the Company will be able to obtain the financing required to fund
F-8
<PAGE>
the planned operations or retain sufficient management expertise to continue its
planned business operations. These factors raise substantial doubt about the
company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
NOTE 7 - CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Transactions:
On August 18, 1997 the Company made its original issuance of 10,000 shares of
common stock in return for future consideration:
Robert Schick 3,200 shares
Alfred Delisle 1,700 shares
Richard Voelker 4,200 shares
Bernard Sandoval 900 shares
In September 1997, Mr. Schick provided the Company with $8,200; in October 1997,
Mr. Delisle provided $10,000; in January 1998, Mr. Sandoval provided $1,400 in
cash and additionally provided the Company with web page design and development
services which were valued at $16,600. In May 1998, the Company reached an
agreement with Mr. Voelker to pay him for certain services provided by him and
in return Mr. Voelker returned his 4,200 shares to the Company. The Board of
Directors immediately retired these shares.
Common Stock Options:
As of April 22, 1999, the Company had the following options to purchase
shares of Common Stock outstanding:
<TABLE>
<CAPTION>
No. of Options Exercise Price Vesting Period Expiration Date
- -------------- -------------- -------------- ---------------
<C> <C> <S> <C>
500,000 $ 1 Fully Vested February 29, 2000
50,000 $ 40 Fully Vested April 1, 2002
25,000 $ 75 Fully Vested April 1, 2002
25,000 $ 100 Fully Vested April 1, 2002
10,000 $ 3 Three Years March 31, 2003
- ---------------
610,000
</TABLE>
F-9
<PAGE>
The Company has not filed any registration statements with the SEC to
register any of the Common Stock underlying any of these options. The Company
anticipates filing a Form S-8 registration statement with the SEC in the future
to register the Common Stock underlying these options, but until it files such a
registration statement any shares of Common Stock issued to exercising option
holders will be subject to the resale restrictions of Rule 144.
Additionally, on January 21, 1999 the Company established an Employee Stock
Ownership Program by reserving 200,000 shares of Class A common stock for this
purpose. No awards under this program have been made.
F-10
<PAGE>
UNAUDITED 9-MONTHS INTERIM FINANCIAL STATEMENTS ENDING MARCH 31, 1999
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
BALANCE SHEET
(unaudited)
March 31, 1999
ASSETS
Current assets:
<S> <C>
Cash $ 18,974
Accounts receivable, trade 48,137
Accounts receivable, terms 90,407
Inventory 60,647
Prepaid expenses and other current assets 16,730
-------
234,895
-------
Furniture and fixtures:
Office furniture and equipment 58,671
Less accumulated depreciation 10,619
-------
48,052
-------
Other assets:
Software development costs, net of
Accumulated amortization of $14,882 39,244
Notes receivable (Note 2) 86,023
Deposits 2,741
-------
128,008
-------
$ 410,955
========
</TABLE>
F-11
<PAGE>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
BALANCE SHEET
(unaudited)
March 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current liabilities:
Notes payable (Note 3) $ 32,135
Accounts payable 311,168
Accrued interest 58
Accrued expenses 36,174
Prepaid sales 6,145
-------
385,679
-------
Stockholders' equity:
Common stock, no par value, 50,000,000 shares
Authorized; 3,074,400 issued and outstanding 427,900
Deficit accumulated during development stage (402,624)
--------
25,276
--------
$ 410,955
========
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
(unaudited)
For the Period From July 1, 1998 to March 31, 1999
- Nine Months Ending - August 15, 1997
(inception) to
March 31, 1998 March 31, 1999 March 31, 1999
--------------- ---------------- --------------
unaudited unaudited
--------------- ---------------- ------------
<S> <C> <C> <C>
Sales $ 99,136 $ 2,403,629 $ 3,058,352
Cost of sales 93,622 2,311,403 2,926,359
--------- --------- ---------
Gross profit 5,514 92,226 131,993
Selling, general and
administrative expenses 18,991 470,087 539,575
Net loss for the period (13,477) (377,861) (407,582)
Earnings per share (basic) (1) ($1.35) (2) ($0.12) (2) ($0.13)
- ----------------------------
<FN>
(1) As of March 31, 1998, there were 10,000 shares of Common Stock issued
and outstanding.
(2) As of March 31, 1999, there were 3,074,400 shares of Common Stock issued
and outstanding.
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(unaudited)
For the Period From July 1, 1998 to March 31, 1999
- Nine Months Ending - August 15, 1997
March 31, March 31, (inception)
1998 1999 to
----------- ------------ March 31,
unaudited unaudited 1999
----------- ----------- ----------
Cash flows from operating
activities:
<S> <C> <C> <C>
Net operating deficit ($13,477) ($377,861) ($407,583)
Adjustments to
Reconcile net loss to
net cash provided:
Depreciation and
Mortgage expense - 18,521 25,501
Net changes in
operating assets
and liabilities:
Accounts receivable (1,021) (124,054) (135,280)
Deposits - (1,361) (2,741)
Other assets - (77,277) (77,377)
Notes receivable (1,862) (18,023) (18,022)
Liabilities 7,478 37,156 42,318
Accounts payable
and accrued 11,529 318,824 345,055
expenses -------- -------- --------
Net cash used by
Operations 2,647 (224,075) (228,129)
-------- -------- --------
Cash flow from investment
activities:
Acquisition of office
equipment (4,399) (44,211) (58,671)
Software development - (28,054) (54,126)
costs incurred -------- -------- --------
Net cash used by
investment activities (4,399) (72,265) (112,797)
F-14
<PAGE>
Cash flow from financing
activities:
Loan repayments - (40,000) -
Loan repaid in stock - - 10,500
Sale of stock 19,600 200,000 219,600
Stock issued in lieu of
cash payments - 52,000 68,600
Related part expenses
paid in stock - 40,000 40,000
Employee stock bonuses - 400 400
Stock issued for board
of directors
compensation - 20,800 20,800
Net cash used by -------- -------- --------
Financing activities 19,600 273,200 359,900
Net increase (decrease)
in cash 17,848 (23,140) 18,974
Cash at beginning of the
period - 42,114 -
-------- -------- --------
Cash at end of the period $ 17,848 $ 18,974 $ 18,974
======== ========== ==========
Supplemental schedule of
Non-cash financing
Transactions:
Issuance of 20,000 common
shares for 1998 board of
directors compensation,
valued at $0.04 a share $ 800
Issuance of 1.3 million
common shares in lieu of
cash payments, valued at
$0.04 a share 52,000
200,000 shares of Banyan
Corporation (BANY)
common stock, valued at
$0.20 a share, received
in a stock exchange and
given to original stock
holders 40,000
Stock bonus of 400 shares
issued to employees,
valued at $1 a share 400
Issuance of 20,000 common
shares for 1999 board of
directors compensation,
valued at $1.00 a share $ 20,000
Repayment of a note
payable in 1,950 shares
of common stock issued
prior to the August 22,
1998 restructuring 10,500
</TABLE>
F-15
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
For the Period From July 1, 1998 to March 31, 1999
Common Stock Issued
------------------ Retained Total
Number Amount Deficit Equity
------ ------ ------- ------
<S> <C> <C> <C> <C>
Balance at July 1, 1998 5,800 $ 36,200 ($24,762) $ 11,438
Debt retired for stock 1,950 10,500 - 21,938
Retirement of old stock (7,750) - - 21,938
Issuance of Class A Common
Stock 500,000 - - 21,938
Purchase of Banyan stock 1,000,000 40,000 - 61,938
Issued for consulting
services 1,300,000 52,000 - 113,938
Board fees 40,000 20,800 - 134,738
Stock sale to investors 234,000 268,000 - 402,738
Shares to employees 400 400 - 403,138
Net loss for the period (377,861) 25,277
--------- --------- --------- --------
Balance at March 31, 1999 3,074,400 $ 427,900 ($402,623) $ 25,277
========= ========= ========= ===========
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
EARNINGS PER SHARE DISCLOSURE
(unaudited)
Interim Period from
Year Ended July 1, 1998 to
June 30, 1998 March 31, 1999
-------------- ------------------
<S> <C> <C>
Net income (loss) ($24,762) ($377,861)
Primary earnings per
share (EPS) (Note 5) ($2.58) ($0.16)
Fully diluted earnings
per share (EPS) ($2.58) ($0.16)
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended June 30, 1998
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Income (loss) before
extraordinary item and
accounting change ($24,762)
Basic EPS
Income (loss) available
To common stockholders (24,762) 9,600 ($2.58)
=======
Effect of Dilutive Securities
(None) - - -
Diluted EPS
Income (loss) available to
Common stockholders plus
assumed conversions ($24,762) 9,600 ($2.58)
========= ===== =======
</TABLE>
F-17
<PAGE>
<TABLE>
<CAPTION>
For the Interim Period Ended March 31, 1999
-------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ------
<S> <C> <C> <C>
Income (loss) before
extraordinary item and
accounting change ($377,861)
Basic EPS
Income (loss) available
To common stockholders (377,861) 2,300,067 ($0.16)
=======
Effect of Dilutive Securities
Stock Options (500,000) (1) - 388,889
Stock Warrants (200,000) - 88,889
Diluted EPS
Income (loss) available to
Common stockholders plus
assumed conversions ($377,861) 2,300,067 ($0.16)
========= ========= =======
<FN>
(1) Does not include 100,000 options with varying exercise prices granted to J.
Scott Sitra, the Company's President and Chief Executive Officer, on
April 1, 1999; 10,000 options with a $3 exercise price granted to Richard
Baron, the Company's General Manager; nor a 200,000 share reserve for a
Future Employee Stock Ownership Program (ESOP).
</TABLE>
ANYTHING INTERNET CORPORATION
(A Development Stage Company)
NOTES TO NINE-MONTH UNAUDITED INTERIM FINANCIAL STATEMENTS
March 31, 1998
NOTE 1 - BASIS OF SIX-MONTH INTERIM FINANCIAL STATEMENT PREPARATION AND LINE OF
BUSINESS:
The information presented as of December 31, 1998, and for the nine-month
periods ending March 31, 1998 and March 31, 1999, has been prepared in
accordance with generally accepted accounting principles for interim financial
statements and has not been audited. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
F-18
<PAGE>
principles for complete financial statements. The results of operations for the
interim periods shown in this report are not necessarily indicative of expected
results for any future interim period or for the entire fiscal year. In the
opinion of management, the unaudited interim financial statements includes all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of March 31, 1999, and
results of its operations and cash flows for the nine-months ending March 31,
1998 and March 31, 1999, and the stockholders' equity for the nine-months ending
March 31, 1999.
Line of business:
Anything, Inc. was organized on August 15, 1997 as a Colorado corporation
to market and distribute computers and related accessory products by using the
Internet as the exclusive distribution channel. On August 28, 1998, Anything,
Inc. changed its name to Anything Internet Corporation, which was made effective
through an amendment to its Articles of Incorporation filed with the Secretary
of State of Colorado on August 31, 1998.
Software Development Costs:
It is the Company's policy to capitalize major software development
activities to reflect the value of the software over its anticipated useful
life. The Company amortizes this software over a three year period from the
implementation of the software.
Revenue Recognition:
The Company recognizes income when product is shipped to customers either
from the Company's inventory or when shipped from distributors' warehouses
directly to the customer. The Company assumes the title to the product when it
is shipped either to the Company or directly to the Company's customer.
NOTE 2 - NOTES RECEIVABLE
On December 31, 1998, the Company loaned Robert C. Schick, President,
$18,022.72 at a rate of 3% per annum. The note matures and is payable in full
on December 31, 1999.
On January 25, 1999, the Company issued 34,000 common shares to an
investment banking firm in return for a $68,000 promissory note bearing interest
at a rate of 8% per annum. The note matures and is payable in full on December
31, 1999.
F-19
<PAGE>
NOTE 3 - LINE OF CREDIT
To help finance the cost of inventory, Nations Credit Distribution Finance,
Inc. has extended the Company, a credit line not to exceed $35,000. The
interest rate applicable to each transaction will depending upon the vendor and
the timeliness of repayment and will range from 0% to 18%. The credit line is
unsecured.
The Company has also established a $50,000 line of credit with US Bank of
Colorado Springs, Colorado. Payments are due on the 15th of each month and
interest accrues at a rate of 10.45% per annum.
NOTE 4 - CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Transactions:
On August 18, 1997 the Company made its original issuance of 10,000 shares
of Common Stock in return for future consideration to:
Number of
Stockholder Shares Issued
------------------ --------------
Robert Schick 3,200
Alfred Delisle 1,700
Richard Voelker 4,200
Bernard Sandoval 900
The Company received the following compensation for these shares issuances:
in September 1997, Mr. Schick provided the Company with $8,200; in October 1997,
Mr. Delisle provided the Company with $10,000; in January 1998, Mr. Sandoval
provided the Company with $1,400 and web page design and development services
valued at $16,000. Additionally, in May 1998, the Company reached an agreement
with Mr. Voelker to pay him for certain services provided by him and in return
Mr. Voelker returned his 4,200 common shares to the Company. The Board of
Directors immediately retired these shares.
In August 1998, the Company exchanged 1,950 shares of common stock with
Raymond Schick and in return Mr. Schick agreed to cancel of a promissory note
for $10,500. Later in August 1998, the Company retired all existing shares of
common stock in exchange for new Class A common shares as follows:
F-20
<PAGE>
Number of Number of
Shares Class A Common
Retired Shares Issued
--------- --------------
Robert Schick 3,200 205,000
Raymond Schick 1,950 125,000
Alfred Delisle 1,700 110,000
Bernard Sandoval 900 60,000
======= ========
7,750 500,000
On the same day the Company also purchased 200,000 shares of Class A common
stock from Banyan Corporation in exchange for 1,000,000 shares of Class A common
stock of the Company. In addition Banyan Corporation also granted the Company
options to purchase 300,000 shares of Class A common stock, with 100,000 shares
at $0.50 per share expiring on February 28, 1999 which was extended to now
expire on August 31, 1999, 100,000 shares at $1.00 expiring on August 31, 1999
and 100,000 shares at $2.00 per share expiring on August 31, 2000. This
transaction was valued at $40,000. Also on the same day, the Company also issued
1,300,000 shares of Class A common stock in exchange for management consulting,
legal and investor relations services. In September 1998, the Company issued to
the members of its Board of Directors 20,000 shares of Class A common stock
(5,000 shares apiece) for services rendered. Finally in December 1998, the
Company sold 200,000 shares of Class A common stock in a private placement. In
January 1999, the Company issued 200 shares of Class A common stock to certain
employees. The Company also issued 20,000 shares of Class A common stock to
members of its Board of Directors (5,000 shares apiece) in January 1999 for
services rendered in 1999. And lastly, in January 1999, the Company issued
34,000 shares to an investment banking firm for a $68,000 promissory note
bearing interest at a rate of 8% per annum.
Common Stock Options:
As of April 22, 1999, the Company had the following options to purchase
shares of Common Stock outstanding:
F-21
<PAGE>
<TABLE>
<CAPTION>
No. of Options Exercise Price Vesting Period Expiration Date
- -------------- -------------- -------------- ---------------
<C> <C> <S> <C>
500,000 $ 1 Fully Vested February 29, 2000
50,000 $ 40 Fully Vested April 1, 2002
25,000 $ 75 Fully Vested April 1, 2002
25,000 $ 100 Fully Vested April 1, 2002
10,000 $ 3 Three Years March 31, 2003
- ---------------
610,000
</TABLE>
The Company has not filed any registration statements with the SEC to
register any of the Common Stock underlying any of these options. The Company
anticipates filing a Form S-8 registration statement with the SEC in the future
to register the Common Stock underlying these options, but until it files such a
registration statement any shares of Common Stock issued to exercising option
holders will be subject to the resale restrictions of Rule 144.
Additionally, on January 21, 1999 the Company established an Employee Stock
Ownership Program by reserving 200,000 shares of Class A common stock for this
purpose. No awards under this program have been made.
NOTE 5 - EARNINGS PER SHARE DISCLOSURE
Primary earnings per share were computed by dividing net income by the
weighted-average number of common shares during the year. All Warrants and
stock options were considered anti-dilutive and not added to the number of
common shares outstanding. The stock options and warrants cannot be used to
repurchase stock as per FASB statement No. 128 because the stock, as of this
time, is non-trading and has no declared value.
F-22
<PAGE>
PART II
- -------
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's grant indemnification to the Company's officers and
directors, present and former, for expenses incurred by them in connection with
any proceeding that they are involved in by reason of their being or having been
an officer or director of the Company. The person being indemnified must have
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Company.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors or officers the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director or officer of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director or officer in connection with the securities being registered, the
Company will, unless in the opinion of its legal counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Other expenses in connection for the issuance and distribution of the
securities being registered hereby are set in the following table:
ITEM AMOUNT
- ---- ------
SEC Registration Fee $167
Transfer Agent Fees. 350
State Securities Laws (Blue Sky) Fees 9,000
Accounting Fees 10,000
Legal Fees 5,000
Printing and Engraving Costs 150
Miscellaneous 2,000
Total $26,667
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On August 22, 1998, the Company underwent a capital restructuring whereby
existing shareholders exchanged their original stock certificates for new stock
certificates aggregating 500,000 shares of Common Stock and were awarded options
to purchase an additional aggregate of 500,000 shares of Common Stock at $1.00 a
share; all options expire on February 29, 2000. The Common Shares and options
were distributed on a pro-rata basis; there were no changes in ownership
percentages. These transactions were exempt from registration under Section
4(2) of the Securities Act and Rule 144 thereunder. Stock issued under these
exemptions carries certain resale restrictions and the stock certificates bear
restrictive legends.
On August 22, 1998, the Company entered into a Share Exchange Agreement
with Banyan Corporation, a publicly traded company listed on the OTC Electronic
Bulletin Board under the trading symbol "BANY". Under the terms of the Share
Exchange Agreement, the Company caused the issuance of 1,000,000 shares of its
Common Stock to Banyan pursuant to exemptions under Section 4(2) of the
Securities Act and Regulation D thereunder in exchange for 200,000 shares of
Banyan Common Stock, issued pursuant to exemptions under Section 4(2) of the
Securities Act and Rule 144 thereunder as a transaction not involving a public
offering. The then market price for Banyan's Common Stock was $0.20 a share,
resulting in an effective price of four cents a share for the Company's Common
Stock.
In addition to the shares of Banyan Common Stock received, the Company was also
granted options to purchase 300,000 additional shares of Banyan Common Stock,
vested immediately, as follows: 100,000 shares at 50 cents a share, expiring
February 28, 1999; 100,000 shares at $1.00 a share, expiring August 31, 1999;
and 100,000 shares at $2.00 a share, expiring August 31, 2000.
On August 22, 1998, the Company issued 1.3 million shares of its Common
Stock to consultants for services rendered in connection with the formation of
the Company, Internet market research and the preparation of the Company's
business and marketing plan. The aggregate value of these services was $52,000,
or $0.04 a share. These issuances were in transactions exempt from registration
under Section 4(2) of the Securities Act and Regulation D, Rule 504 thereunder
as transactions made to "sophisticated" Internet-savvy consultants by an issuer
not involving a public offering.
On September 28, 1998, the Company issued 20,000 shares of Common Stock to
the members of its Board of Directors (5,000 shares to each of the Company's
four directors) for their services as directors to the Company through December
31, 1998. Each share of Common Stock was issued at a price of $0.04 a share, or
valued at $200 per director for an aggregate issuance of $800. These issuances
II-2
<PAGE>
were in transactions exempt from registration under Section 4(2) of the
Securities Act and Regulation D, Rule 504 thereunder made to "sophisticated"
Internet-savvy persons by an issuer not involving a public offering.
In December 1998, the Company issued 200,000 "Units" at a price of $1.00
per Unit. Each Unit consisted of (i) one share of the Company's Common Stock
and (ii) one redeemable stock purchase warrant entitling the holder to purchase
one share of the Company's Common Stock at an exercise price of $3.00 a share.
The Company may redeem the Warrants upon not less than 30 days, nor more than 60
days, prior notice at any time prior to the Warrants' expiration on December 31,
1999 at a price of $0.01 a Warrant, provided that the closing bid quotation for
the Company's Common Stock as reported by any quotation medium on which the
Company's Common Stock is quoted is at least $4.00 for ten consecutive trading
sessions ending on the two days prior to the day on which notice of the
redemption is given. This transaction was exempt from registration under
Section 4(2) of the Securities Act and Regulation D, Rule 504 thereunder as a
limited offering made to 23 "sophisticated" and "accredited" investors. This
private placement was made by the Company's officers, directors and employees
without the use of an underwriter or placement agent; all prospective investors
were supplied with a full disclosure private placement memorandum prior to their
investments being accepted by the Company.
On January 10, 1999, the Company issued 200 shares of Common Stock to each
Donald Horning and Robie Blair, employees of the Company. Should their
employment continue at the Company, each will receive an additional 100 shares
each quarter for the next eight quarters for an aggregate of 1,000 shares of
Common Stock each. These transactions were and are anticipated to be exempt
from registration under Section 4(2) of the Securities Act and Rule 144
thereunder. Stock issued under these exemptions carries certain resale
restrictions and the stock certificates bear restrictive legends.
On January 10, 1999, the Company set aside a reserve of 200,000 shares of
Common Stock to establish an Employee Stock Ownership Program. This reserve,
and its subsequent issuances, is exempt from registration under Section 4(2) of
the Securities Act and Regulation D, Rule 504 thereunder as a transaction by an
issuer not involving a public offering.
On January 21, 1999, the Company issued 20,000 shares of Common Stock to
the members of its Board of Directors (5,000 shares to each of the Company's
four directors) for their services as directors to the Company through December
31, 1999. Each share of Common Stock was issued at a price of $1.00 a share, or
valued at $5000 per director for an aggregate issuance of $20,000. These
II-3
<PAGE>
issuances were in transactions exempt from registration under Section 4(2) of
the Securities Act and Regulation D, Rule 504 thereunder made to "sophisticated"
Internet-savvy persons by an issuer not involving a public offering.
On January 25, 1999, the Company issued 34,000 shares of Common Stock in
exchange for $68,000, or $2.00 a share. This transaction was exempt from
registration under Section 4(2) of the Securities Act and Regulation D, Rule 504
thereunder made to an "accredited" investor as a transaction involving a limited
offering.
ITEM 27. EXHIBITS
The following is a complete list of exhibits filed as part of this
Registration Statement, which are incorporated herein.
Exhibit
Number Description
- ------- -----------
3.1* Articles of Incorporation
3.2* Amendment to Articles of Incorporation
3.3* Certificate of Incorporation
3.4* By-Laws
4.1* Specimen copy of stock certificate for Common Stock, no par value
4.2* Specimen copy of Stock Purchase Warrant Certificate underlying the
Common Shares being registered in this Registration Statement
5.1* Opinion and Consent of William M. Ziering, Esq.
10.1* Lease Agreement for 3020 North El Paso, Ste. 103, Colorado Springs, CO
80907, dated June 2, 1998
10.2 Lease Agreement for 1111 N. Westshore Blvd., Ste. 408, Tampa, FL
33607, dated January 20th, 1999
10.3 Equity Exchange Agreement between Banyan Corporation and Anything,
Inc., dated August 19, 1998.
23.1 April 20, 1999 consent of J. Paul Kenote, CPA, P.C.
23.2* Consent of William M. Ziering, Esq. (included in Exhibit 5.1 herein)
27.1* Financial Data Schedule for fiscal year ending June 30, 1998
27.2* Interim Financial Data Schedule for six-months ending December 31,
1998.
27.3 Interim Financial Data Schedule for nine-months ending March 31, 1999.
- -----------------------------
* Incorporated by reference to registration statement on Form SB-2 (No.
333-71785) filed February 4, 1999.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes as follows:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events arising after
the effective date of which, individually or together, represent
a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the
plan of distribution.
2. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described above in Item 24, or otherwise,
the Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction of the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
3. The undersigned Registrant will, for purposes of determining liability
under the Securities Act, treat each post-effective amendment as a new
registration statement of securities offered, and the offering of the securities
at that time to be the initial bona fide offering.
4. For purposes of determining liabilities arising under the Securities Act,
the information omitted from the form of the prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant under Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time the SEC declares it effective.
II-5
<PAGE>
5. The undersigned Registrant will file a post-effective amendment to remove
from registration any of the securities that remain unsold at the end of the
offering.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Colorado Springs, State of Colorado on this 22nd day
of April, 1999.
Anything Internet Corporation
By: /s/ J. Scott Sitra
-------------------------------------
J. Scott Sitra
President, Chief Executive Officer and
Director
II-6
<PAGE>
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ J. Scott Sitra
- ---------------------- President, Chief
J. Scott Sitra Executive Officer and
Director April 22, 1999
/s/ Robert C. Schick
- ----------------------
Robert C. Schick
Director April 22, 1999
/s/ Cameron B. Yost
- ----------------------
Cameron B. Yost Secretary, Treasurer
and Director April 22, 1999
/s/ Alfred W. Delisle
- ----------------------
Alfred W. Delisle Business Development
Manager and Director April 22, 1999
</TABLE>
LEASE AGREEMENT
[insert]
EQUITY EXCHANGE AGREEMENT
Re-Capitalization
Of
ANYTHING, INC.
August 19, 1998
Banyan Corporation hereby proposes the following plan of re-capitalization of
Anything, Inc. (hereafter "Anything");
1) Issued additional Class A common stock on a pro rata basis to Anything
shareholders of record August 21, 1998, so that the total number of shares
outstanding in Anything is 500,000.
2) Issue Options to purchase 500,000 shares of Class A common stock of
Anything at $1.00. Said Options shall be distributed on a pro rata basis to
Anything shareholders of record August 20, 1998, and shall expire February 29,
2000.
II-7
<PAGE>
3) Sell 1,000,000 shares of Anything to Banyan Corporation for consideration
comprising of 200,000 shares of Banyan Corporation Class A common stock, issued
under Rule 144, at time of closing and Options, at time of closing, to purchase
additional shares of Banyan Corporation Class A common stock (Rule 144) as
follows:
100,000 shares @ $ .50 Expires February 28,1999
100,000 shares @ $1.00 Expires August 31, 1999
100,000 shares @ $2.00 Expires August 31, 2000
Said shares and Options to be distributed on a pro rata basis to Anything
shareholders of record on August 20, 1998.
4) Engage J. Scott Sitra to contract Investor Public Relations and
Management Consulting services for the company. For said contract services,
Anything shall issue a total of 1,300,000 shares to whomever Sitra engages for
said services.
5) Authorize Units comprising of one share of Anything Class A common stock
and an Warrant to purchase on share of Anything Class A common stock for $3.00.
Said Warrant shall expire twelve months after issue. Said Unit shall sell for
$1.00 consideration and there will be no more than 200,000 Units issued.
/s/ Cameron B. Yost
- ----------------------
Cameron B. Yost, President
Banyan Corporation
II-8
<PAGE>
LEASE AGREEMENT
BETWEEN
AUSTIN DEVELOPMENT COMPANY
"Lessor/Landlord"
AND
Anything PC
"Lessee/Tenant"
<PAGE>
<TABLE>
<CAPTION>
LEASE INDEX
ITEMS PARAGRAPH NO.
- ------------------------------------------------ -------------
<S> <C>
DEFINITIONS 1.
PREMISES AND TERM 2.
RENT 3.
OPERATING EXPENSE ADJUSTMENTS 4.
USE OF PREMISES 5.
ASSIGNMENT AND SUBLETTING 6.
ACCESS TO PREMISES 7.
LANDLORD'S SERVICES, 8.
ELECTRICAL OVERLOAD; STRUCTURAL OVERLOAD 9.
PARKING AREAS 10.
LEASEHOLD IMPROVEMENTS 11.
REPAIRS AND MAINTENANCE 12.
ALTERATIONS AND IMPROVEMENTS 13.
INDEMNITY 14.
DAMAGE BY FIRE OR THE ELEMENTS 15.
BUILDING RULES AND REGULATIONS 16.
EMINENT DOMAIN 17.
SIGNS AND ADVERTISING 18.
TENANTS DEFAULTS 19.
CONTRACTUAL LANDLORDS LIEN 20.
SUBORDINATION 21.
QUIET ENJO-Y MENT 22.
LAST MONTH'S RENT 23.
MECHANIC'S LIE14S 24.
FORCE MAJEURE 25.
SEVERABILITY 26.
HOLDING 27.
RELOCATION 28.
RENT A SEPARATE COVENANT 29.
JOINT AND SEVERAL LIABILITY; CHANGE IN BUSINESS
FORM 30.
ABSENCE OF OPTION 31.
CORPORATE TENANCY 32.
BROKERAGE COMMISSION 33.
LANDLORD'S DEFAULT 34.
NOTICES 35.
INSURANCE 36.
RECORDING 37.
STATUTORILY MANDATED NOTIFICATION 38.
NON-DISCLOSURE 39.
HAZARDOUS MATERIALS 40.
ADA 41.
RENEWAL 42.
AMENDMENTS 43.
SIGNATURE PAGE
EXHIBIT(S)
LEGAL DESCRIPTION A
LANDLORD'S WORK B
BUILDING RULES AND REGULATIONS C
</TABLE>
2
<PAGE>
LEASE AGREEMENT
- ----------------
THIS LEASE AGREEMENT ("Lease") is made this 20th day of January,
---- -------
1999, by and between the "Landlord" and the "Tenant' hereafter set forth.
WITNESSETH:
1. DEFINTIONS: In addition to the definitions contained elsewhere in this
----------
Lease, the following definitions shall apply:
(a)
Landlord: AUSTIN DEVELOPMENT COMPANY
Address: Post Office Box 22197
Tampa, Florida 33622
(b)
Tenant: ANYTHING PC
Address: 1111 N. WESTSHORE BLVD.
Suite 408
Tampa, Florida 33607
(c) Premises: Suite No. 408 cons1sting of approximately 1,093 rentable
square feet (which the parties expressly agree are contained in the
Premises), on the attached Exhibit "B" expressly made a part hereof. The
Premises are located on the 4th floor of the structure, hereinafter called
the "Building", located at 1111 N. WESTSHORE BLVD., TAMPA, FLORIDA 33607.
The parties expressly agree that there are 1,093 rentable square feet
within the Premises and 75,673 rentable square feet within the Building,
despite the fact that such figures may not be precise. For the purposes of
Items I (i), and 5, 11 and 15 of this Lease, the term "Building" includes
its appurtenances, and its parking facilities.
(d) "Use of Premises": General and Admin1strative
----------------------------
(e) "Commencement Date": The later of February 1, 1999 ("the anticipated
Commencement Date"), or the date Landlord delivers to Tenant possession of
the Premises. If, however, Tenant takes possession of the Premises prior to
the anticipated Commencement Date, then the date Tenant so takes possession
shall be the Commencement Date.
(f) "Last Month's Rent": The sum of One thousand, two hundred and seventy
--------------------------------------
five dollars and sixteen cents Dollars ($1,275.16). ($1,275.16 + 6.75% tax
---------------------------------------------------------------------------
[$86.07 1 = $1,361.23). (Sales tax subject to change.)
----------------------
(g) "Term": Not less than 12 months commencing on the Commencement Date,
this Lease to end on the last day of the 12th calendar month after the
Commencement Date.
(h) "Rent": (See also Item 3.) Rent and all other sums payable by Tenant to
Landlord under this Lease, plus any applicable tax, shall be paid to
Landlord, without demand, recoupment, abatement deduction or offset, at its
office presently located at P.O. Box 22197, Tampa, Florida 33622, or at
--------------------------------------
such other place as Landlord may hereafter specify in writing.
<TABLE>
<CAPTION>
Year Rate per RSf Annual Monthly Late Fee
(5%)
- ------ ------------ ----------- --------- ----------
<S> <C> <C> <C> <C>
YEAR 1 14.00 15,302. 00 1,275.16 $ 63.76
YEAR 2 $ - $ - $ -
YEAR 3 $ - $ - $ -
</TABLE>
(i) "Base Year" means the calendar year in which the Lease commences.
(j) "Operating Expense Base Amount" means the operating expenses of the
Building, as defined at Item 4 hereof, in the Base Year of this Lease.
"Real Estate Tax Base Amount" means the total amount of real property taxes
on the Land and Building, as defined at Item 4 hereof, in the Base Year of
this Lease.
(k) "Proportionate Share": The net rentable area in the Premises (1,093
square feet) divided by the net rentable area in the Building (75,673
square feet), which equals .0144 percent.
3
<PAGE>
If Tenant leases from Landlord any additional space in THE BUILDING
PURSUANT TO THE TERMS and PROVISIONS OF THIS Lease, then Tenant's
Proportionate Share shall be increased accordingly.
(l) "Additional Rent": As described in Item 3 of this Lease.
(m) "Land": Land shall mean real property described in Exhibit A.
(n) "Building": Building shall mean the improvements presently or hereafter
constructed on the Land.
2. PREMISES AND TERM. Landlord, in consideration of the Rent hereinafter
-------------------
reserved to be paid and of the covenants, conditions and agreements to be kept
and performed by Tenant, hereby leases, lets and demises to Tenant, and Tenant
hereby leases and hires from Landlord, that certain space called the Premises as
described above in Item 1, Section (c).
If Landlord, for any reason whatsoever, cannot deliver possession of the
Premises to Tenant on or before the anticipated Commencement Date, this Lease
shall not be void or voidable, nor shall Landlord be liable to Tenant for any
claim, loss or damage resulting therefrom, but, in that event there shall be an
abatement of Rent and Additional Rent covering the period between the
anticipated Commencement Date and the time when Landlord can so deliver
possession, the date when Landlord can so deliver possession being deemed to be
the "Commencement Date" (Commencement Date). The ending date of this Lease shall
be extended for not less than an identical period of time that transpired
between the anticipated Commencement Date and the date thereafter Landlord so
delivered possession (Commencement Date), it being the parties' intent that this
Lease have not less than a complete Term as described and contemplated in Item
1, Section (f) above. To this end, if the actual Commencement Date is a day
other than the first day of a particular month, the Term of this Lease shall not
expire until the last day of the last month of the proposed Term as described in
Item 1, Section (g). If the Commencement Date is other than the anticipated
Commencement Date, the parties representatives shall execute a letter amendment
to this Lease (which they are hereby authorized to do) whereby the Commencement
Date and expiration date of this Lease mill be specified; however, their failure
to do so shall have no effect on the other contents of this Lease, such
contemplated execution to be merely for clarification purposes. By occupying the
Premises, Tenant shall be conclusively deemed to have accepted the Premises as
complying fully with each, every, any and all of Landlord's covenants and
obligations with respect to the delivery thereof Tenant shall also have the
non-exclusive right to use the parking facilities appurtenant to the Building.
If, however, the Premises is not ready by February 1, 1999, either party may
terminate this Lease within ten (10) days thereof or upon written notice to the
other party.
3. RENT. Tenant convenants and agrees to pay without demand, recorpment,
----
abatement, deduction or offset, to Landlord Rent (and Additional Rent) for the
Premises on or before the first (1st) day of the first (1st) full calendar month
of the Term hereof and on or before the first (1st) day of each and every
successive calendar month thereafter during the full Term of this Lease, subject
to the adjustments as provided hereinafter, along with any applicable tax, at
the current rate of six and three-quarters (6.75%) percent. In the event the
Commencement Date occurs on a day other than the first (1st) day of a calendar
month, the first Rent payment shall be in the amount of the Rent for one (1)
full calendar month, plus the prorated Rent for the calendar month in which the
Term of this Lease commences, such payment to be due on the Commencement Date.
Whenever under the terms of this Lease any sum of money is required to be
paid by Tenant in addition to the Rent herein reserved, whether or not such sum
is herein described as "Additional Rent", or a provision is made for the
collection of said sum as "Additional Rent" said sum shall nevertheless, at
Landlord's option, if not paid when due, be deemed Additional Rent, and shall be
collectible as such with the first installment of Rent thereafter falling due
hereunder. In the event any installment or increment of Rent or Additional Rent
payable under this Lease shall not be paid when due, a "late charge" of five
percent (51/6) of the amount overdue may be charged (as Additional Rent) by
Landlord for the purpose of defraying the expense and inconvenience incident to
handling such overdue payment and for the purpose of compensating Landlord for
its attendant inconvenience and loss of cash flow,
4. OPERATING EXPENSE ADJUSTMENTS. The Landlord and Tenant each acknowledge
------------------------------
that the Rent specified in Item 3 of this Lease does not provide for increases
in operating expenses and real estate taxes in excess of the Base Year Amounts.
Accordingly, during the term of this Lease, and any extension(s) thereto,
beginning with the first calendar year subsequent to the Base Year, Tenant shall
pay to Landlord, as additional rent, its proportionate share of estimated
increases in operating expenses and real estate taxes over the Base Year
Amounts.
4
<PAGE>
Commencing on January 1 of the calendar year following the Base Year and
continuing on the first day of each calendar month thereafter until the
expiration or other termination of this Lease, Tenant shall pay to Landlord, as
additional monthly rental, an amount equal to one-twelfth of the Tenant's
Proportionate Share of the amount by which budgeted operating expenses and real
estate taxes for the cuffcnt calendar year exceeds the Base Year Amounts. In the
event the amount of additional monthly rental collection hereunder for the
preceding twelve month period is less than the actual excesses for such year,
Tenant shall remit the balance thereof to the Landlord within five (5) days
after the receipt of such notice. In the event the amount of additional monthly
rental collection hereunder for the preceding twelve month period is greater
than the actual excesses for such period, Landlord shall remit the difference to
the Tenant accompanied by said notice.
The term "operating expenses" includes all expenses incurred by Landlord
with respect to the maintenance and operation of the Building of which the
leased "Premises" are a part, including, but not limited to, the following:
maintenance, repair and replacement costs; electricity, fuel, water, sewer, gas
and other utility charges; security, window washing and janitorial services;
trash; landscaping and pest control; management fees, wages and benefits payable
to employees of Landlord whose duties are directly connected with the operation
and maintenance of the Building; all services, supplies, repairs, replacements
or other expenses for maintaining and operating the Building or project
including parking and common areas; the cost, including interest, amortized over
its usefid life, of any capital improvements made to the Building by Landlord
after the date of this lease which is required under any governmental law or
regulation that was not applicable to the Building at the time it was
constructed; the cost, including interest, amortized over its useful life, of
installation of any device or other equipment for the purpose of improving
operating efficiency; all other expenses which would generally be regarded as
operating and maintenance expenses which would reasonably be amortized over a
period not to exceed five years; all insurance premiums Landlord is required to
pay or deems necessary to pay, including public liability insurance, with
respect to the Building. The term operating expenses does not include the
---
following: repairs, restoration or other work occasioned by fire, wind, the
elements or other casualty; income and franchise taxes of Landlord; real estate
broker's commissions, attorney's fees, costs and disbursements and other
expenses incurred in connection with negotiations or disputes with Tenants,
other occupants; advertising expenses and expenses for the renovating of space
for new Tenants; interest or principal payments on any mortgage or other
indebtedness of Landlord; any depreciation allowance or expense; or operating
expenses which are the responsibility of Tenant.
The term "Taxes" means the aggregate amount of real property taxes and
assessments taxes, assessed, imposed, or levied by any lawful authority upon the
Land and the Building in any calendar year during the term of this Lease; and,
shall also include admin1strative costs and contingency fees paid to independent
consultants engaged to negotiate, on behalf of Landlord, assessments imposed by
applicable taxing authorities.
If Landlord, in its sole discretion in operating the Building, chooses to
install any energy or labor saving devices, equipment, fixtures or appliances to
or in the Building that otherwise might be considered a capital expenditure,
then Landlord may depreciate the cost of the equipment, device, appliance or
fixture into the Operating Expenses of the Building, including interest at a
reasonable rate, all according to generally accepted accounting principles
applied on a cons1stent basis.
5. USE OF PREMISES. The Premises shall be used by Tenant as described above in
----------------
Item 1, Section (d), and for no other business or purpose whatsoever without the
prior written discretionary consent of Landlord. Tenant shall not do or permit
to be done in or about the Premises or Building, nor bring or keep or permit to
be brought or kept therein, anything which is prohibited by, or will in any way
conflict with, any law, statute, ordinance or governmental Me or regulation now
in force or which may hereafter be enacted or promulgated, or which is presently
or hereafter prohibited by any standard form of fire insurance policy or will
presently or hereafter in any way increase the ex1sting rate of or affect any
fire or other insurance upon the Building or any of its contents, or presently
or hereafter cause a cancellation of any insurance policy covering the Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises or Building, which will presently
or hereafter in any way obstruct or interfere with the rights of other Tenants
of the Building, or injure or annoy them or use or allow to be used the Premises
or Building for any improper, immoral, unlawful or objectionable purpose (as
determined by Landlord); nor shall Tenant cause, maintain, or permit any
nuisance (as determined by Landlord or by law) in or about the Premises or
commit or suffer to be committed any waste in, on, or about the Premises or
Building. Tenant shall be responsible for all losses and damages to Landlord as
a result of Tenant's failure to use, occupy and surrender the Premises or
Building in strict accordance with the contents of this Lease, and such
responsibility shall survive the expiration or earlier termination of this
Lease. Tenant, at Tenant's expense, shall comply with all laws, rules, orders,
statutes, ordinances, directions, regulations and requirements of all federal,
state, county and municipal authorities pertaining to Tenant's use and occupancy
of the Premises or Building and with the recorded covenants,
5
<PAGE>
conditions and restrictions pertaining thereto, regardless of when they become
effective or applicable, including, without limitation, all applicable federal,
state and local laws, regulations or ordinances pertaining to air and water
quality, Hazardous Materials, waste disposal, air emissions and other
environmental matters, all zoning and other land use matters, and with any
direction of any public officer or officials which shall impose any duty upon
Landlord or Tenant with respect to the use or occupation of the Premises. For
the purposes of this Item 5, the term "Tenant" includes Tenant's agents,
employees, principals, officers, successors, assigns, subtenants, invitees,
contractors and consultants.
6. ASSIGNMENT AND SUBLETTING. Tenant shall not assign the right of occupancy
----------------------------
under this Lease, or any other interest therein, or sublet the Premises, or any
portion thereof without the prior written consent of Landlord, which the parties
agree may be withheld at Landlord's sole discretion. Tenant absolutely shall
have no right of assignment or subletting if it is, or has ever been, in default
of this Lease. If Landlord elects to grant its written consent to any proposed
assignment or sublease (whether by Tenant or by others claiming by or through
Tenant), Tenant or such others agree to pay Landlord an admin1strative fee in a
reasonable amount (but not less than $150.00), plus attorney's fees to process
and approve such assignment or sublease, and Landlord may prescribe the
substance and form of such assignment or sublease.
Notwithstanding any assignment of this Lease, or the subletting of the
Premises, or any portion thereof, Tenant shall continue to be fidly liable for
the performance of the terms, conditions and covenants of this Lease, including,
but not limited to, the payment of Rent and Additional Rent, This continuing
liability shall be absolute and unconditional and shall remain in full force and
effect without regard to, and shall not he released, discharged, diminished,
reduced or in any other way affected by; (a) any amendment or modification of,
or supplement to, this Lease or any further assignment or transfer thereof or
any further sublease pertaining thereto; or (b) any action taken or not taken by
Landlord against any assignee or subtenants; or (c) any agreement which modifies
any of the rights or obligations of the parties (or their respective successors)
under this Lease; or (d) any agreement which extends the time within which an
obligation under this Lease is to be performed; or (e) any waiver of the
performance of an obligation required under this Lease; or (f) any failure to
enforce any of the obligations set forth in this Lease. Consent by Landlord to
one or more assignments or sublettings shall not operate as a waiver of
Landlord's rights as to any subsequent assignments or sublettings. Landlord
shall have the additional option, which shall be exercised by providing Tenant
with written notice, of terminating Tenant's rights and obligations under this
Lease rather than permitting any assignment or subletting by Tenant, any
statement or implication in this Lease or at law to the contrary
notwithstanding.
If Landlord permits any assignment or subletting by Tenant and if the
monies (no matter how characterized) received as a result of such assignment or
subletting [when compared to the monies still payable by Tenant to Landlord]
should be greater than would have been received hereunder had not Landlord
permitted such assignment or subletting, then the excess shall be payable by
Tenant to Landlord, it being the parties' intention that Landlord, and not
Tenant, in consideration for Landlord's permitting such assignment or
subletting, shall be the party to receive any profit from any such assignment or
subletting. If there are one or more assignments or sublettings by Tenant to
which Landlord consents, then any and all extension options to be exercised
subsequent to the date of such assignment or subletting and all options to lease
additional space in the Building to be exercised subsequent to the date of such
assignment or subletting are absolutely waived and terminated at Landlord's sole
discretion, In the event of the transfer and assignment by Landlord of its
interest in this Lease and/or sale of the Building containing the Premises,
either of which it may do at its sole option, Landlord shall thereby be released
from any further obligations hereunder, and Tenant agrees to look solely to such
successor in interest of Landlord for performance of such obligations. The
provisions of Item 35 hereafter dealing with "Notices" shall be amended to
provide the correct names and addresses of the assignee or subtenant. if Tenant
is a partnership or corporation whose stock is not regularly traded on a bona
fide public exchange, and if any transfer, sale, pledge or other disposition of
a partnership interest or the common stock shall occur which changes the power
to vote the majority of interest in the partnership or of the outstanding
capital stock of the company, such action shall be considered an assignment
under the terms of this Lease. Any breach of this Item 6 by Tenant will
constitute an automatic default under the terms of this Lease, per Item 19
hereof
7. ACCESS TO THE PREMISES. Landlord or its authorized agent or agents shall have
----------------------
the right to enter upon the Premises at all reasonable times for the purposes of
inspecting the same, preventing waste, making such repairs as Landlord may
consider necessary (but without any obligation to do so except as expressly
provided for herein), and showing the Premises to prospective Tenants,
mortgagees and/or purchasers. If during the last month of the Term, Tenant shall
have removed all or substantially all of Tenant's property therefrom, Landlord
may immediately enter and alter, renovate and redecorate the Premises without
elimination or abatement of Rent or Additional Rent or incurring liability to
Tenant for
6
<PAGE>
any compensation or offsets in Rent or Additional Rent and charges owed and such
acts shall have no effect upon this Lease.
8. LANDLORD'S SERVICES. Landlord shall, at its expense, famish the Premises
--------------------
with (i) electricity subject to Item 9 of this Lease; (ii) heat and air
conditioning during reasonable and usual business hours (exclusive of Saturday
afternoons, Sundays and nationally-recognized holidays) reasonably required for
the occupation of the Premises, such heat and air-conditioning to be provided by
utilizing the ex1sting Building systems, it being expressly understood and
agreed by the parties that Landlord specifically shall not be liable for any
losses or damages of any nature whatsoever incurred by Tenant due to any failure
of the equipment to function properly, or while it is being repaired, or due to
any governmental laws, regulations or restrictions pertaining to the furnishing
or use of such beat and air-conditioning; (iii) elevator service; (iv) lighting
replacement for customary fluorescent lighting provided by Landlord; (v) toilet
room supplies; (vi) daily janitor service during the time and in the manner that
such janitor service is customarily famished in first class office Buildings in
the metropolitan area where the Building is located; (vii) water; and (viii)
sewerage. The foregoing services are designated "Building Standard".
TENANT WILL PAY $ 8.00 PER HOUR PER FLOOR (THIS PRICE IS SUBJECT TO CHANGE)
FOR HVAC AFTER NORMAL BUSINESS HOURS WHICH ARE:
MONDAY THROUGH FRIDAY 8:00 a.m. -6:00 p.m.
Saturday 8:00 a.m. - 12:00 noon.
Tenant agrees that Landlord is only responsible for Building Standard
maintenance and Building Standard services. If other, more complete or specialty
services and maintenance (over Building Standard) are required, then Tenant
solely shall be and is responsible for same and for any and all expenses and
costs of any nature whatsoever associated with same. To this end, Tenant is and
shall be solely responsible for any expenses and costs of any nature whatsoever
associated with, among other things, maintaining upgraded Tenant improvements in
the Premises, replacing non-Building Standard lighting fixtures and bulbs in the
Premises, servicing, operating and maintaining any separate and non-Building
Standard HVAC systems and facilities serving the Premises, etc.
Landlord shall not be liable for any damages directly or indirectly or
consequentially resulting from, nor shall any Rent or Additional Rent herein set
forth be reduced or abated by reason of, (1) installation, use, or interruption
of use of any equipment in connection with the furnishing of any of the
foregoing services, or (2) failure to famish, or delay in furnishing, any such
services when such failure or delay is caused by accident or any condition
beyond the reasonable control of Landlord or by the making of necessary repairs
or improvements to the Premises or to the Building or because of any
governmental laws, regulations or restrictions. The temporary failure to furnish
any such services shall not be construed as an eviction of Tenant or relieve
Tenant from the duty of observing and performing each, every, any and all of the
provisions of this Lease.
9. ELECTRICAL OVERLOAD; STRUCTURAL OVERLOAD.
-------------------------------------------
A) Tenant's use of electrical services famished by Landlord shall be
subject to the following:
(1) Tenant's electrical equipment shall be restricted to that
equipment which individually does not have a rated capacity
greater than .5 kilowatts per hour and/or require voltage
other than 120/208 volts, single phase. Collectively,
Tenant's equipment shall not have an electrical design load
greater than an average of five (5) watts per square foot
(including overhead lighting).
(2) Tenant's overhead lighting shall not have a design load
greater than an average of two (2) watts per square foot.
(3) If Tenant's consumption of electrical services exceeds
either the rated capacities and/or design loads as per
subsections (1) and (2) above, then Tenant shall remove such
equipment and/or lighting to achieve compliance within ten
(10) days after receiving notice from Landlord. Or upon
receiving Landlord's prior written approval, such equipment
and/or lighting may remain in the Premises, subject to the
following:
(a) Tenant shall pay for all costs of installations and
maintenance of submeter, wiring, air-conditioning and
other items required by Landlord, in Landlord's
discretion, to accommodate Tenant's excess design loads
and capacities;
7
<PAGE>
(b) Tenant shall pay to Landlord, upon demand, the cost of
the excess demand and consumption of electrical service
at rates determined by Landlord which shall be in
accordance with any applicable laws; and
(c) Landlord may, at its option, upon not less than thirty
(30) days' prior written notice to Tenant discontinue
the availability of such extraordinary utility service.
If Landlord gives any such notice, Tenant will contract
directly with the public utility for the supplying of
such utility service to the Premises.
B) Tenant shall not place a load upon any floor of the Premises
exceeding 50 pounds per square foot which such floor was designed to carry and
which may be allowed by law. Landlord reserves the right to prescribe the weight
and position of all heavy equipment and similar items, and to prescribe the
reinforcing necessary, if any, which in the opinion of Landlord may be required
under the circumstances, such reinforcing to be at Tenant's pre-paid expense.
10. PARKING AREAS. Landlord shall keep and maintain in good condition
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parking areas that may be provided. Landlord reserves the right to control the
method, manner and time of parking in parking spaces. Landlord shall not be
responsible at all, any statement or implication elsewhere in this Lease to the
contrary notwithstanding, for the security of the parking areas provided
pursuant to this Lease. Any and all parking charges payable by Tenant, whether
to Landlord or to Landlord's designate(s), shall be Additional Rent;
furthermore, if Tenant fails to pay duly, fully and timely such parking charges,
Landlord [or its designate(s)] may discontinue, without notice to Tenant (or
anyone else), the availability of the parking space(s) the subject of such
parking charges, no matter by whom such parking spaces are or were being
utilized or are in the future to be utilized, anything to the contrary elsewhere
in this Lease notwithstanding.
11. LEASEHOLD EYIPROVEMENTS. The Premises are rented "as is" without any
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additional services or improvements to be rendered by Landlord, other than those
services described in Item 8 and such other services or improvements as may be
described in Exhibit "B" attached hereto and expressly made a part hereof. If
Landlord is to additionally alter, remodel, improve, or do any physical act or
thing to the space as presently constituted or as described in Exhibit "B", same
shall be at the sole expense of Tenant and shall be affected only by a "Work
Order" signed by the parties. In the absence of a "Work Order" signed by the
parties, Landlord is under no obligation to make any such alteration, remodeling
or improvement or do any physical act or thing to the space.
Any and all extraordinary (as so determined by Landlord at its sole
discretion) expenses and costs of any nature whatsoever attributable to the
installation, maintenance and/or removal of telephone equipment, computer
equipment and the like shall be borne solely by Tenant.
12. REPAIRS AND MAINTENANCE. Landlord will, at its own cost and expense,
--------------------------
except as may be provided elsewhere herein, make necessary repairs of damage to
the Building corridors, lobby, structural members of the Building, and equipment
used to provide the Building Standard services referred to in Item 8, unless any
such damage is caused by acts or omissions of Tenant, its agents customers,
employees, principals, contractors, consultants, assigns, subterrants or
invitees, in which event Tenant will bear the cost of such repairs. Tenant will
allow no maintenance or repairs to be done in, on, to or about the Premises
other than by a licensed contractor (such term to include all degrees and levels
of subcontractors) approved by Landlord in writing prior to any such maintenance
or repairs being undertaken. Landlord shall be entitled to require such
contractor to be bonded and insured in such amounts and with such companies as
Landlord may in its discretion prescribe. Tenant will not injure the Premises or
the Building but will maintain the Premises in a clean, attractive, condition
and in good repair, except as to damage to be repaired by Landlord as provided
above. Upon termination of this Lease, Tenant will surrender and deliver the
Premises to Landlord in the same condition in which they ex1sted at the
commencement of this Lease, excepting only ordinary wear and tear and damage
arising from any cause not required to be repaired by Tenant, or Landlord
approved alterations and improvements. This Item 12 shall not apply in the case
of damage or destruction by fire or other casualty which is covered by insurance
maintained by Landlord on the Building (as to which Item 15 hereof shall apply)
or damage resulting from an Eminent Domain taking (as to which Item 17 hereof
shall apply).
13. ALTERATIONS AND IMPROVEMENTS. Tenant absolutely shall not make any
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alterations, additions or improvements to or in the Building outside the
Premises. Furthermore, Tenant shall make no alterations or improvements
(including additions) to or in the Premises without the prior written approval
of Landlord, unless in each instance and for each such alteration or
improvement, Landlord or a contractor approved by Landlord is hired to do such
alterations or improvements. Such approval shall not be unreasonably withheld in
the case of alterations or improvements to the interior of the Premises if such
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alterations or improvements are normal for the use described in Item 1 (d) of
this Lease, do not adversely affect utility of the Premises for future Tenants,
do not alter the exterior of the Building, and are accompanied by insurance
satisfactory to Landlord and by prepayment or bond provisions or waivers by the
contractor in form satisfactory to Landlord sufficient to protect the Building
from claims of lien of any sort; otherwise, such approval may be withheld for
any reason whatsoever. Furthermore, such alterations or improvements absolutely
shall not affect the mechanical, plumbing, electrical and HVAC systems in the
Premises or the Building and shall not be of a structural nature. Tenant shall
conduct its work in such a manner as to maintain harmonious labor relations and
as not to interfere with the operation of the Building and shall, prior to the
commencement of the work, submit to Landlord copies of all necessary permits.
Landlord reserves the right to have final approval of the contractors hired by
Tenant. All such contractors hired by Tenant shall be, at levels and coverage's
prescribed by Landlord, licensed, bonded and insured, and Landlord may require
evidence of same, which Tenant agrees to secure and provide Landlord prior to
the commencement of any work by such contractors. All alterations or
improvements, whether temporary or permanent in character, made in or upon the
Premises, either by Landlord or Tenant, shall be Landlord's property and at the
end of the term hereof shall remain in or upon the Premises without compensation
to Tenant. If , however, Landlord shall request in writing, Tenant will, prior
to expiration or earlier termination of this Lease, remove any and all
alterations, and improvements placed or installed by Tenant in the Premises, and
will repair any damage caused by such removal. All of Tenant's furniture,
movable trade fixtures and equipment not attached to the Building may be removed
by Tenant at the expiration of this Lease, if Tenant so elects, and shall be so
removed, if required by Landlord, and, if not so removed, shall, at the option
of Landlord, become the property of Landlord. To the extent Tenant makes any
alterations or improvements and/or to the extent Landlord on behalf of Tenant
under an "Extra Work Agreement" makes such alterations or improvements, and as a
result thereof it can be determined that thereupon was caused an increase in
real estate taxes or insurance premiums, then Tenant shall be responsible for
reimbursing Landlord for such increases as Landlord may pay.
14. INDEMNITY. Landlord shall not be liable for, and Tenant will indemnify
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and save Landlord (and Landlord's officers, principals, agents, employees and
insurers) harmless of and from, each, every, and all fines, suits, damages,
claims, demands, losses and actions (including attorney's fees) for any injury
to person or damage to or loss of property on or about the Premises and Building
caused by the negligence or misconduct or breach of this Lease by Tenant, its
employees, agents, principals, contractors, consultants, assigns, subtenants,
invitees or by any other person entering the Premises or the Building under
express or implied invitation of Tenant, or arising out of Tenant's use of the
Premises. Landlord absolutely shall not be liable or responsible for any loss or
damage to any property or the death or injury to any person occasioned by theft,
crime (of any nature whatsoever), fire, act of God, public enemy, injunction,
riot, strike, insurrection, war, court order, requisition of governmental body
or authority, by other Tenants of the Building or by any other matter beyond the
absolute control of Landlord, or for any injury or damage or inconvenience which
may arise through repair or alteration of any part of the Building, or failure
to make repairs, or from any cause whatsoever except Landlord's negligence or
intentional act. It is specifically understood and agreed that there shall be no
personal liability on Landlord (nor on Landlord's officers, principals, agents
and employees) with respect to any of the covenants, conditions or provisions of
this Lease; in the event of a breach or default by Landlord of any of its
obligations under this Lease, Tenant shall look solely to the equity of Landlord
in the Building for the satisfaction of any and all of Tenant's right and
remedies.
15. DAMAGE BY FIRE OR THE ELEMENTS. In the event that the Building is
-------------------------------
totally destroyed by fire, tornado or other casualty, or in the event the
Premises or Building is so damaged that, within Landlord's discretion,
rebuilding or repairs cannot be completed within one hundred eighty (180) days
after the date of such damage, Landlord, within sixty (60) days of the casualty,
shall give Tenant written notice of the estimated time for completion or of
Landlord's intent not to repair. In such event, either Landlord or Tenant may,
at its option, by written notice to the other given not more than thirty (30)
days after the date of such fire or other casualty, terminate this Lease. In
such event, the Rent and Additional Rent shall be abated during the unexpired
portion of this Lease effective with the date of such fire or other casualty.
In the event the Building or the Premises are damaged by fire, tornado, or
other casualty covered by Landlord's insurance but only to such extent that
rebuilding or repairs can be completed within one hundred eighty (180) days
after the date of such damage, or if the damage should be more serious but
neither Landlord nor Tenant elects to terminate this Lease, then Landlord shall,
within thirty (30) days after the date of such damage or such election, commence
to rebuild or repair the Building and/or the Premises and shall proceed with
reasonable diligence to restore the Building and/or the Premises to
substantially the same condition in which it/they was/were immediately prior to
the happening of the casualty, except that Landlord shall not be required to
rebuild, repair or replace any part of the furniture, equipment, fixtures and
other improvements which may have been placed by Tenant or other Tenants or
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occupants within the Building or Premises. Landlord shall, unless such damage is
deemed by Landlord to be the result of the negligence or willful misconduct of
Tenant or Tenant's employees, agents, principals, contractors, consultants,
assigns, subtenants or invitees, allow Tenant a fair diminution of Rent and
Additional Rent during the time of such rebuilding or repairs. In the event any
mortgagee, or the holder of any deed of trust, security agreement or mortgage on
the Building, requires that the insurance proceeds be used to retire the
mortgage debt, Landlord shall have no obligation to rebuild and this Lease shall
terminate upon notice to Tenant. Any insurance which may be carried by Landlord
or by Tenant against loss or damage to the Premises or its contents shall be for
the sole benefit of the party carrying such insurance and under its sole
control.
16. BUILDING RULES AND REGULATIONS. Tenant shall faithfully observe and
----------------------------------
comply with the Rules and Regulations printed on or annexed to (and expressly
made a part of) this Lease and all reasonable modifications of and additions
thereto from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the nonperformance of any of said Rules and
Regulations by any other Tenant, occupant, invitee or visitor of the Building.
Tenant shall and does hereby have an affirmative obligation (to include
indemnification of Landlord, per Item 14 hereof) to notify its agents,
employees, principals, assigns, subtenants and invitees of the contents of such
Rules and Regulations and of this Lease and to assure their compliance
therewith.
17. EMINENT DOMAIN. If the whole or a portion of the Building is taken for
---------------
any public or quasi-public use under any statute or by right of Eminent Domain
or private purchase in lieu thereof, then at Landlord's option, but not
otherwise, this Lease, the Term hereby demised and each, every, any and all
rights of Tenant hereunder shall immediately cease and terminate and the Rent
and Additional Rent shall be adjusted as of the date of such termination. Tenant
shall be entitled to no part of the award made for such condemnation (or other
taking) or the purchase price thereof. Nevertheless, anything to the contrary
notwithstanding, likewise at Landlord's option, but not otherwise, if the
Premises are unaffected by such condemnation (or other taking), then this Lease
and each and every one of its provisions shall continue in full force and
effect.
18. SIGNS AND ADVERTISING. Without the prior written approval of Landlord,
-----------------------
which may be withheld at Landlord's discretion, Tenant shall not permit the
painting or display of any signs, placard, lettering, or advertising material of
any kind on or near the exterior of the Premises or the Building.
Notwithstanding the foregoing, Tenant may, with Landlord's prior approval,
display Tenant's name on or near the entrance to the Premises, in a
Building-standard manner prescribed by Landlord.
19. TENANT'S DEFAULT. The happening, of any one or more of the following
------------------
events, shall constitute a default hereunder:
a) Tenant's failure to pay the Rent, Additional Rent, or any other sums (no
matter how characterized) payable hereunder for a period of three (3) days
after written notice by Landlord;
b) Tenant's failure to observe, keep or perform any of the other terms,
covenants, agreements or conditions of this Lease or in the Building Rules
and Regulations for a period of ten (10) days after written notice by
Landlord:
c) The insolvency of Tenant;
d) Tenant's making an assignment for the benefit of creditors;
e) A receiver or trustee being appointed for Tenant or a substantial portion
of Tenant's assets;
f) Tenant's voluntarily petitioning for relief under, or otherwise seeking the
benefit of, any bankruptcy, reorganization, arrangement or insolvency law;
g) Tenant's deserting, vacating or abandoning any portion of the Premises or
attempting to mortgage, pledge or otherwise encumber in any way its
interest hereunder;
h) Tenant's interest under this Lease being sold under execution or other
legal process;
i) Tenant's interest under this Lease being affected, modified or altered by
any unauthorized assignment or subletting or by operation of law;
j) Any of the goods or chattels of Tenant used in, or incident to, the
operation of Tenant's business at, from or in the Premises being seized,
sequestered, or impounded by virtue of, or under authority of, any legal
proceeding;
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k) If Tenant shall be late in the payment of any sums due hereunder as rent or
additional rent three (3) times in any twelve month period;
1) Tenant's failure to operate continuously during normal business hours from
the Premises in a fully-staffed, fully-equipped manner and/or as
contemplated by Item I (d) of this Lease; or
m) Tenant's failure to take occupancy of the Premises when same is tendered by
Landlord to Tenant; or
n) Any attempted assignment or subletting of this Lease without Landlord's
written consent.
In the event of any of the foregoing happenings, Landlord, at its election,
may exercise any one or more of the following options, the exercise of any of
which shall not be deemed to preclude the exercise of any others herein l1sted
or otherwise provided or permitted by statute or general law at the same time or
in subsequent times or actions (all of which are cumulative):
1. Terminate Tenant's rights to possession under this Lease and re-enter
and retake possession of the Premises and relet or attempt to relet
the Premises on behalf of Tenant at such rent and under such terms and
conditions as Landlord may deem best under the circumstances for the
purpose of reducing Tenant's liability. Landlord shall not be deemed
to have thereby accepted a surrender of the Premises, and Tenant shall
remain fully liable for any and all Rent, Additional Rent, or other
sums (no matter how characterized) due under this Lease and for all
damages suffered by Landlord because of Tenant's breach of any of the
covenants of this Lease,
2. Declare this Lease to be terminated and ended, and re-enter upon and
take possession of the Premises whereupon all right, title and
interest of Tenant in the Premises shall end.
3. Accelerate and declare the entire remaining unpaid Rent and Additional
Rent for the balance of this Lease to be immediately due and payable
forthwith, and may at once, take legal action to recover and collect
the same.
No re-entry or retaking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a specific
written notice of such intention is given to Tenant, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of any Rent, Additional
Rent or other monies due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violations of any of the terms, provisions and
covenants herein contained. Landlord's acceptance of Rent or Additional Rent or
other monies following any event of default hereunder shall not be construed as
Landlord's waiver of such event of default. No forbearance by Landlord of action
upon any violation or breach of any of the terms, provisions, and covenants
herein contained shall be deemed or construed to constitute a waiver of the
terms, provisions, and covenants herein contained. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of any other violation
or default. Legal actions to recover for loss or damage that Landlord may suffer
by reason of termination of this Lease or the deficiency from any reletting as
provided for above shall include the expense of repossession or reletting and
any repairs or remodeling undertaken by Landlord following repossession.
THE PARTIES HERETO SHALL, AND THEY HEREBY DO, WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ACCOUNT OF ANY MATTERS WHATSOEVER ARISING OUT OF, OR IN ANY
WAY CONNECTED, WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT,
TENANT'S USE OR OCCUPANCY OF THE PREMISES AND/OR BUILDING, AND/OR CLAIM OF LOSS,
INJURY OR DAMAGE. THE COVENANTS CONTAINED HEREIN ARE INDEPENDENT. In the event
Landlord commences any proceeding to enforce this Lease or the Landlord/Tenant
relationship between the parties or for nonpayment of Rent, Additional Rent or
other monies due Landlord from Tenant under this Lease, Tenant will not
interpose any counterclaim of whatever nature or description in any such
proceedings. In the event Tenant must, because of applicable court rules,
interpose any counterclaim or other claim against Landlord in such proceedings,
Landlord and Tenant covenant and agree that, in addition to any other lawful
remedy of Landlord, upon motion of Landlord, such counterclaim or other claim
asserted by Tenant shall be severed out of the proceedings instituted by
Landlord (and, if necessary, transferred to a court of different jurisdiction),
and the proceedings instituted by Landlord may proceed to final judgment
separately and apart from and without consolidation with or reference to the
status of each counterclaim or any other claim asserted by Tenant.
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The parties hereto agree that any and all suits for any and every breach of
this Lease shall be instituted and maintained only in those courts of competent
jurisdiction in the county or municipality in which the Building is located and
Tenant, hereby submits to the jurisdiction of Florida courts. In the event of
litigation by and between the parties [or their respective successor(s)] to
enforce the terms and provisions of this Lease, the prevailing party shall be
entitled to recover from the non-prevailing party the prevailing party's
reasonable attorney's fees and court costs, all through final appeal.
Time is of the essence of this Lease; and in case Tenant shall NI to
perform the covenants and obligations on its part to be performed at the time
fixed for the performance of such respective covenants and obligations by the
provisions of this Lease, Landlord may declare Tenant to be in default of such
Lease.
20. CONTRACTUAL LANDLORD'S LIEN. Landlord shall have, at all times, a valid
---------------------------
security interest to secure payment of all Rent Additional Rent and other sums
of money becoming due hereunder from Tenant, and to secure payment of any
damages or loss which Landlord may suffer by reason of the breach by Tenant of
any covenant, agreement or condition contained herein, upon all goods, wares,
equipment, fixtures, furniture, improvements and other personal property of
Tenant presently or which may hereinafter be situated in the Premises, and all
proceeds therefrom, and such property shall not be removed therefrom without
consent of Landlord until all arrearages in Rent and Additional Rent as well as
any and all other sums of money then due to Landlord hereunder, shall first have
been paid and discharged and all of the covenants, agreements, and conditions
hereof have been fully complied with and performed by Tenant. In consideration
of this Lease, upon the occurrence of an event of default by Tenant, Landlord
may, in addition to any other remedies provided herein, enter upon the Premises
and take possession of any and all goods, wares, equipment, fixtures, furniture,
improvements, and other personal property of Tenant situated on or in the
Premises, without liability for trespass or conversion, and sell the same at
public or private sale, with or without having such property at the sale, after
giving Tenant reasonable notice of the time and place of any public sale or of
the time after which any private sale is to be made, at which sale Landlord or
its assigns may purchase unless otherwise prohibited by law. Unless otherwise
provided by law, and without intending to exclude any other manner of giving
Tenant reasonable notice, the requirement of reasonable notice shall be met if
such notice is given in the manner prescribed in Item 35 dealing with "Notices"
in this Lease at least five (5) days before the time of sale. The proceeds from
any such disposition, less any and all expenses connected with the taking of
possession, holding and selling of the property (including reasonable attorney's
fees and other expenses), shall be applied as a credit against the indebtedness
secured by the security interest granted in this Item 20. Any surplus shall be
paid to Tenant or as otherwise required by law, and Tenant shall pay any
deficiencies forthwith. Upon request by Landlord, Tenant agrees to execute and
deliver to Landlord a financing statement in form sufficient to perfect the
security interest of Landlord in the aforementioned property and proceeds
thereof under the provisions of the Uniform Commercial Code then in force in the
State of Florida.
21. SUBORDINATION. In consideration of the execution of this Lease by
--------------
Landlord, Tenant accepts this Lease subject to any deeds of conveyance and any
deeds of trust, master leases, security interests or mortgages and all renewals,
modifications, extensions, spreads, consolidations and replacements of the
foregoing which might now or hereafter constitute a lien upon the Building (or
the land upon which it is situated) or improvements therein or thereon or upon
the Premises and to zoning ordinances and other Building and fire ordinances and
governmental regulations relating to the use of the property (hereinafter
collectively referred to as a "superior interest". Although no instrument or act
on the part of Tenant shall be necessary to effectuate such subordination,
Tenant shall, nevertheless, for the purpose of confirmation, at any time
hereafter, on demand in the form(s) prescribed by Landlord, execute any
instruments, estoppel certificates, releases or other documents that may be
requested or required by any purchaser or any holder of any superior interest
for the purpose of subjecting and subordinating this Lease to such deed of
conveyance or to the lien of any such deed of trust, master lease, security
interest, mortgage, or superior interest. Tenant hereby appoints Landlord
attorney-in-fact, irrevocably, to execute and deliver any such instrument or
document for Tenant should Tenant fail or refuse to do so.
22. OUIET ENJOYMENT. Provided Tenant has fully, duly and timely performed
----------------
all of the terms, covenants, agreements and conditions of this Lease on its part
to be performed, including the payment of Rent, Additional Rent and all other
sums due hereunder, Tenant shall peaceably and quietly hold and enjoy the
Premises, except as described in Item 21 above, against Landlord and all persons
claiming by, through or tinder Landlord, for the Term (as may be extended)
herein described, subject to the provisions and conditions of this Lease.
23. LAST MONTH'S RENT. Upon Tenant's execution of this Lease, Tenant shall
-----------------
prepay the last month's rent including sales tax for the leased Premises, to the
Landlord. Consequently, should there be any rental increases, sales tax
increases or expansions during Tenant's tenancy of the premises, Tenant
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FURTHER AGREES TO PAY LANDLORD a supplemental amount to equal the TOTAL LAST
MONTH'S RENT INCLUDING sales tax.
24. MECHANICIS LIENS. Tenant is prohibited from making, and agrees not to
------------------
make, alterations in the Premises, except as permitted by Item 13, and Tenant
shall not permit any mechanic's lien or liens to be placed upon the Premises or
the Building or improvements thereon during the Term (as may be extended) hereof
caused by or resulting from any work performed, materials furnished or
obligation incurred by or at the request of Tenant, and in the case of the
filing of any such lien, Tenant will promptly pay or statutorily bond same. if
default in payment or statutory bonding thereof shall continue for ten (10) days
after written notice thereof from Landlord to Tenant, Landlord shall have the
right and privilege, at Landlord's option, of paying the same or any portion
thereof without inquiry as to the validity thereof, and any amounts so paid,
including expenses, interest, and attorney's fees, shall be so much additional
indebtedness hereunder due from Tenant to Landlord and shall be repaid to
Landlord immediately on rendition of a bill therefor, together with interest per
annum at the maximum rate permitted by law until repaid, and if not so paid
within ten (10) days of the rendition of such bill, shall constitute default
under Item 19 hereof,
The interest of Landlord shall not be subject to liens for improvements
made by Tenant in or to the Premises or the Building. Tenant shall notify every
contractor making such improvements of the provision set forth in the
immediately preceding sentence of this paragraph. The parties agree, should
Landlord so request, to execute, acknowledge and deliver without charge to the
other a Memorandum of Lease in recordable form containing a confirmation that
the interest of Landlord (as well as those parties holding interests superior
to, or inferior to, Landlord) shall not be subject to liens for improvements
made by Tenant to the Premises or the Building.
25. FORCE MAJEURE. Whenever a period of time is herein prescribed for action
--------------
to be taken by Landlord, Landlord shall not be liable or responsible for, and
there shall be excluded from the computation for any such period of time, any
delays due to strikes, riots, acts of God, shortages of labor or material,
theft, crime, fire, public enemy, injunction, insurrection, court order,
requisition of governmental body or authority, war, governmental laws,
regulations or restrictions or any other causes of any kind whatsoever which are
beyond the absolute control of Landlord.
26. SEVERABMITY. If any clause or provision of this Lease is illegal,
------------
invalid or unenforceable under present or future laws effective during the Term
(as may be extended) of this Lease, then and in that event, it is the intention
of the parties hereto that the remainder of this Lease shall not be affected
thereby.
27. HOLDING OVER. The failure of Tenant to surrender the Premises on the
-------------
date provided herein for the expiration of the Term (as may have been
theretofore extended) of this Lease (or at the time this Lease may be terminated
otherwise by Landlord), and the subsequent holding over by Tenant, with or
without the consent of Landlord, shall result in the creation of a tenancy at
will at double the Rent payable at the time of the date provided herein for the
expiration of this Lease or at the time this Lease may be terminated otherwise
by Landlord. This provision does not give Tenant any right to hold over at the
expiration of the Term (as may have been heretofore extended) of this Lease, and
shall not be deemed, the parties agree, to be a renewal of the Lease Term (as
may have been heretofore extended), either by operation of law or otherwise.
28. RELOCATION. If the premises cons1st of less than two thousand five
-----------
hundred (2,500) square feet, Landlord may at any time during the Term (as may be
extended) of this Lease relocate Tenant and substitute for the Premises other
space (which would then become the "Premises" for the purpose of this Lease) in
the Building or any other nearby Austin managed building of similar quality. The
parties expressly agree that Landlord shall pay the reasonable physical moving
costs of such relocation, but shall not be responsible for any other losses,
expenses, costs, damage or injuries of any nature whatsoever. Tenant's new space
shall be comparable to the Premises hereby leased. Tenant shall relocate within
thirty (30) days (or such additional time as Landlord may direct) of Landlord's
written notice to Tenant that Tenant do so. Tenant's failure to relocate timely
shall be a Default (see Item 19 of this Lease), no curative notice of any nature
(after the expiration of such 30 day or additional period) to be due Tenant from
Landlord. Upon such a Default by Tenant, Landlord shall have all the rights and
remedies described in said Item 19.
29. RENT SEPARATE COVENANT. Tenant shall not for any reason withhold or
-------------------------
reduce Tenant's required payments of Rent, Additional Rent and other charges
provided in the Lease, it being expressly understood and agreed contractually by
the parties that the payment of Rent and Additional Rent is a contractual
covenant by Tenant that is independent of the other covenants of the parties
under this Lease.
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30. JOINT AND SEVERAL LIABELITY; CHANGE IN BUSINESS FORM. If two or
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more individuals, corporations, partnerships, or other business associations (or
any combination of two or more thereof) shall sign this Lease as Tenant, the
liability of each such individual, corporation, partnership or other business
association to pay Rent and Additional Rent and perform all other obligations
hereunder shall be deemed to be joint and several. In like manner, if Tenant is
a partnership or other business association, the members of which are, by virtue
of statute or general law, subject to personal liability, the liability of each
such member shall be joint and several. Tenant may not and shall not change or
convert its business form and/or composition in any way whatsoever without
Landlord's prior, written and solely discretionary consent.
31. ABSENCE OF OPTION. The submission of this Lease for examination does
-------------------
not constitute a reservation of or option for the Premises, and this Lease
becomes effective only upon execution and delivery thereof by Landlord.
32. CORPORATE TENANCY. If Tenant is a corporation, the undersigned officer
------------------
of Tenant hereby warrants and certifies to Landlord that Tenant is a corporation
in good standing and is authorized to do business in the State of Florida. The
undersigned officer of Tenant hereby further warrants and certifies to Landlord
that he or she, as such officer, is authorized and empowered to bind the
corporation to the terms of this Lease by his or her signature thereto.
Landlord, before it accepts and delivers this Lease, may require Tenant to
supply it with a certified copy of the corporate resolution authorizing the
execution of this Lease by Tenant. If Tenant is a corporation (other than one
whose shares are regularly and publicly traded on a recognized stock exchange),
Tenant represents that the ownership and power to vote its entire outstanding
capital stock belongs to and is vested in the officer or officers executing this
Lease or members of his, her or their immediate family. If there shall occur any
change in the ownership of and/or power to vote the majority of the outstanding
capital stock of Tenant, whether such change of ownership is by sale,
assignment, bequest, inheritance, operation of law or otherwise, without the
prior written discretionary consent of Landlord, then Landlord shall have the
option to terminate this Lease upon thirty (30) days' written notice to Tenant
so stating; furthermore, Tenant shall have an affirmative obligation to notify
immediately Landlord of any such change.
33. BROKERAGE COMMISSION. Tenant warrants that there are no claims for
----------------------
broker's commissions or finder's fees in connection with its execution of this
Lease and agrees to indemnify and save Landlord completely harmless from any
liability that may arise from such claim, including reasonable attorney's fees.
34. LANDLORD'S DEFAULT. Landlord shall in no event be charged with default
-------------------
in the performance of any of its obligations under this Lease unless and until
Landlord shall have failed to perform such obligations within ten (10) days (or
within such additional time as is reasonably required to remedy any such
default) after written notice to Landlord by Tenant properly specifying and
detailing the particulars of wherein and whereby Tenant claims Landlord has
failed to perform any such obligations. If the holder of record of the first
mortgage covering the Premises shall have given prior written notice to Tenant
that it is the holder of such first mortgage and such notice includes the
address at which notices to such mortgagee are to be sent, then Tenant shall
give such mortgagees notice simultaneously with any notice given to Landlord to
correct any default of Landlord as herein above provided. Such mortgagee shall
have the right within thirty (30) days (or within such additional time as is
reasonably required to correct any such default) after receipt of such notice to
correct or remedy such default before Tenant may take any action under this
Lease by reason of such default. Any notice of default given Landlord by Tenant
shall be null and void unless simultaneous notice has been given by Tenant to
said first mortgagee, It is specifically understood and agreed, anything in this
Lease to the contrary notwithstanding, that there shall be no personal liability
on Landlord (nor on Landlord's officers, principals, agents and employees) with
respect to any of the covenants, conditions or provisions of this Lease; in the
event of a breach or default by Landlord of any of its obligations under this
Lease; Tenant shall look solely to the equity of Landlord in the Building for
the satisfaction of Tenant's remedies, and in absolutely no event shall Landlord
be liable for prospective profits or special, indirect, or consequential
damages. Likewise, anything in this Lease to the contrary notwithstanding, in no
event shall Tenant have the right to terminate this Lease as a result of any
default by Landlord, but rather, Tenant's remedies against Landlord shall be
solely limited to a claim for damages and/or a claim for injunction.
35. NOTICES. Any notice or document required or permitted to be delivered
-------
hereunder shall be deemed to be delivered or given when (a) actually received or
(b) signed for or "refused" as indicated on the postal service return receipt.
Delivery shall and must be by personal delivery or by United States mail,
postage prepaid, certified or reg1stered mail, addressed to the parties hereto
at the respective address set out opposite their names below, or at such other
address as they may hereafter specify by written notice delivered in accordance
herewith:
14
<PAGE>
LANDLORD: AUSTIN DEVELOPMENT COMPANY
POST OFFICE BOX 22197
TAMPA, FLORIDA 33622
TENANT: ANYTHING PC
1111 N. WESTSHORE BLVD.
SUITE 408
TAMPA, FLORIDA 33607
36. INSURANCE. Tenant shall not conduct or permit to be conducted any activity,
----------
or place any equipment, materials or other items in, on or about the Premises or
the Building, which will in any way increase the rate of fire or liability or
casualty insurance on the Building. Should Tenant fail to comply with the
foregoing covenant on its part to be performed, Tenant shall reimburse Landlord
for such increased amount upon written demand therefor from Landlord, the same
to be considered Additional Rent payable hereunder.
Tenant shall, at Tenant's sole expense, obtain and keep in force at all
times during the Term (as may be extended) of this Lease comprehensive general
liability insurance, including property damage, on an occurrence basis, with
limits of not less than One Million Dollars ($1,000,000.00) combined single
limit, insuring Landlord and Tenant against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto, with Landlord named as an additional insured. The limit of
said insurance shall not, however, limit the liability of Tenant hereunder.
Tenant may carry said insurance under a blanket policy, provided an endorsement
naming Landlord as an additional insured is attached thereto. Tenant shall
furnish Landlord with a Certificate of Insurance, confirming that Landlord has
been named as an additional insured and providing for written notice to Landlord
in the event of any change or termination in the maintenance of such insurance.
Tenant shall maintain insurance upon all property in the Premises owned by
Tenant or for which Tenant is legally liable, Tenant shall maintain insurance
against such other perils and in such amounts as Landlord may in writing from
time to time require. The insurance required to be obtained and maintained under
this Lease shall be with a company or companies licensed to issue the relevant
insurance and licensed to do business in the State of Florida. Such insurance
company or companies shall each have a policyholder's rating of no less that "A"
in the most recent edition of Best's Insurance Report. No policy shall be
------------------------
cancel-able or subject to reduction of coverage except after thirty (30) days'
prior written notice to Landlord. All policies of insurance maintained by Tenant
shall be in a form, and shall have a substance, acceptable to Landlord with
satisfactory evidence that all premiums have been paid. Tenant agrees not to
violate or permit to be violated any of the conditions of provisions of the
insurance policies required to be furnished hereunder, and agrees to promptly
notify Landlord of any fire, loss or other casualty. If Tenant fails to procure
and maintain insurance as required hereunder, Landlord may do so, and Tenant
shall, on written demand, as Additional Rent, reimburse Landlord for all monies
expended by Landlord to procure and maintain such insurance within five (5) days
of the receipt of such demand.
Tenant hereby waives and releases Landlord of and from any and all
liabilities, claims and losses for which Landlord is or may be held liable to
the extent Tenant receives or is entitled to receive insurance proceeds on
account thereof.
Upon Landlord's written request for same, Tenant will provide Landlord with
written evidence of Tenant's compliance with its obligations under this Item 36.
37. RECORDING. This Lease shall not be recorded without Landlord's prior
written discretionary
consent.
38. STATUTORILY MANDATED NOTIFICATION. As required by F.S. 404.056(8),
------------------------------------
Landlord hereby notifies Tenant as follows: "RADON GAS: Radon is a naturally
occurring radioactive gas that, when it has accumulated in a Building in
sufficient quantities, may present health risks to persons who arc exposed to it
over time. Levels of radon that exceed federal and state guidelines have been
found in Buildings in Florida. Additional information regarding radon and radon
testing may be obtained from your county public health unit."
39. NON-DISCLOSURE. Tenant agrees that it will not divulge or disclose to
--------------
third parties the terms, provisions and conditions of this Lease. Tenant's
breach of this Item 39 shall constitute a Default tinder Item 19 of this Lease,
no curative notice to Tenant from Landlord being required.
15
<PAGE>
40. HAZARDOUS MATERIALS. Tenant shall not cause or permit any Hazardous
--------------------
Materials (as hereinafter defined) to be brought upon, kept or used in or about
the Premises or the Building by Tenant, its agents, PRINCIPALS, EMPLOYEES,
assigns, subtenants, contractors, consultants or invitees without prior written
consent of Landlord, which consent may be withheld for any reason whatsoever or
for no reason at all. If Tenant breaches the obligations stated in the
immediately preceding sentence, or if the presence of Hazardous Material on the
Premises or around the Building caused or permitted by Tenant (or the aforesaid
others) results in contamination of the Premises or the Building or the
surrounding area(s), or if contamination of the Premises or the Building or the
surrounding area(s) by Hazardous Material otherwise occurs for which Tenant is
legally, actually or factually liable or responsible to Landlord (or any party
claiming by, through or under Landlord) for damages, losses, costs or expenses
resulting therefrom, then Tenant shall fully and completely indemnify, defend
and hold harmless Landlord (or any party claiming by, through or under Landlord)
from any and all claims, judgments, damages, penalties, fines, costs,
liabilities or losses [including, without limitation: (i) diminution in the
value of the Premises and/or the Building and/or the land on which the Building
is located and/or any adjoining area(s) which Landlord owns or in which it holds
a property interest; (ii) damages for the loss or restriction on use of rentable
or usable space of any amenity of the Premises, the Building or the land on
which the Building is located; (iii) damages arising from any adverse impact on
marketing of space; and (iv) any sums paid in settlement of claims, attorney's
fees, consultants' fees and expert fees] which arise during or after the Term of
this Lease, as may be extended, as a consequence of such contamination. This
indemnification of Landlord by Tenant includes, without limitations, costs
incurred in connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work required by any federal, state
or local governmental agency or political subdivision because of Hazardous
Material present in the soil or ground water on or under the Premises or the
Building. Without limiting the foregoing, if the presence of any Hazardous
Material on, under or about the Premises, the Building or the surrounding
area(s) caused or permitted by Tenant (or the aforesaid others) results in any
contamination of the Premises, the Building or the surrounding area(s), Tenant
shall immediately take all actions at its sole expense as are necessary or
appropriate to return the Premises, the Building and the surrounding area(s) to
the condition ex1sting prior to the introduction of any such Hazardous Material
thereto; provided that Landlord's prior written discretionary approval of such
actions by Tenant shall be first obtained. The foregoing obligations and
responsibilities of Tenant shall survive the expiration or earlier termination
of this Lease.
As used herein, the term "Hazardous Material" means any hazardous or toxic
substance, material or waste, including, but not limited to, those substances,
materials, and wastes l1sted in the United States Department of Transportation
Hazardous Materials Table (49 CFR 172.101) or by the Environmental Protection
Agency as hazardous substances (40 CFR Part 302) and amendments thereto, or such
substances, materials and wastes that are or become regulated under any
applicable local, state or federal law. "Hazardous Material" includes any and
all material or substances which are defined as "hazardous waste", "extremely
hazardous waste" or a "hazardous substance' pursuant to state, federal or local
governmental law. "Hazardous Substance' includes, but is not restricted to
asbestos, polychlorobiphenyls ("PCB's") and petroleum.
Landlord and its agents shall have the right, but not the duty, to inspect
the Premises at any time and from time to time to determine whether Tenant is
complying with the terms of this Item 40. If Tenant is not in compliance with
this Item 40, Landlord shall have the right to immediately enter upon the
Premises to remedy any contamination caused by Tenant's failure so to comply,
notwithstanding any other provision of this Lease. Landlord shall use its best
efforts to minimize interference with Tenant's business, but shall not be liable
for any interference caused thereby.
Tenant shall not (either with or without negligence) cause or permit the
escape, disposal or release of any biologically or chemically active or other
hazardous substances, or materials. Tenant shall not allow the storage or use of
such substances or materials in any manner not sanctioned by law or by the
highest standards prevailing in the industry for the storage and use of such
substances or materials, nor allow to be brought into the Project any such
materials or substances except to use in the ordinary course of Tenant's
business, and then only after written notice is given to Landlord of the
identity of such substances or materials. Without limitation, hazardous
substances and materials shall include those described in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq., any applicable state or local laws and the
regulations adopted under these acts. If any lender or governmental agency shall
ever require testing to ascertain whether or not there has been any release of
hazardous materials, then the reasonable costs thereof shall be reimbursed by
Tenant to Landlord upon demand as additional charges if such requirement applies
to the Premises. In addition, Tenant shall execute affidavits, representations
and the like from time to time at Landlord's request concerning Tenant's best
knowledge and belief regarding the presence of hazardous substances or materials
on the Premises. In all events, Tenant shall indemnify Landlord in the manner
elsewhere provided in this lease from any release of hazardous materials on the
Premises occurring while
16
<PAGE>
- ------
Tenant is in possession, or elsewhere if caused by Tenant or persons acting
under Tenant. The within covenants shall survive the expiration or earlier
termination of the lease term.
Any non-compliance by Tenant with its duties, responsibilities and
obligations tinder this Item 40 shall be an "automatic" (no notice of any nature
from Landlord to Tenant being required) default of this Lease (see Item 19).
41. NOTICE TO OWNERS, PROSPECTIVE TENANTS AND BUYERS OF REAL PROPERTY
------------------------------------------------------------------------
REGARDING "THE AMERICANS WITH DISABILITIES ACT". Please be advised that a Tenant
- ------------------------------------------------
of real property may he subject to the Americans With Disabilities Act (the
ADA), a Federal law codified at 42 USC Section 12101 et seq. Among other
requirements of the ADA that could apply to your property, Title III of the ADA
requires Tenants of "public accommodations" to remove barriers to allow access
by disabled persons and provide auxiliary aids and services for hearing, vision
or speech impaired persons by January 26, 1992. The regulations under Title III
of the ADA are codified at 28 CFR Part 36.
We recommend that you and your attorney review the ADA and the regulations,
and, if appropriate, your lease, to determine if this law could apply to you,
and the nature of the requirements. These are legal issues. You are responsible
for conducting your own independent investigation of these issues. The Landlord
cannot give you legal advice on these issues.
Please acknowledge your receipt of this notice by signing and dating it below.
RECEIVED ON: , 19
------------------------- --------
SIGNATURE: -----------------------------------------
PRINTED NAME: ------------------------------------
42. RENEWAL. Provided that no default is then ex1sting or continuing in the
-------
performance of any of the terms or covenants of this Lease, Landlord hereby
grants Tenant the option of renewing and extending flie term of this Lease for
one additional term of N/A year(s), commencing at midnight on the expiration of
the initial term of this Lease, upon such terms and conditions as are mutually
agreed upon in writing by the parties hereto. In the event Landlord and Tenant
are unable to reach a mutual written agreement as to all such terms and
conditions prior to the expiration of the initial term of this Lease, the Option
herein granted shall be deemed null and void. The renewal option herein granted
shall be exercised by notifying Lessor in writing at least ninety (90) days
prior to the expiration of the initial term of this Lease.
43. AMENDMENTS. This Lease contains the entire agreement between the parties
----------
hereto and may not be altered, changed or amended, except by written instrument
signed by both parties hereto. No provision of this Lease shall be deemed to
have been waived by Landlord unless such waiver is in writing signed by Landlord
and addressed to Tenant, nor shall any custom or practice which may grow up
between the parties in the admin1stration of the provisions hereof be constmed
to waive or lessen the right of Landlord to ins1st upon the performance by
Tenant in strict accordance with the terms hereof. The terms, provisions,
covenants, and conditions contained in this Lease shall apply to, inure or the
benefit of, and be binding upon the parties hereto, and upon their respective
successors in interest and legal representative, except as otherwise herein
expressly provided.
The parties each acknowledge that they have thoroughly read and understand
this Lease (to include its Exhibits and attachments) in its entirety, that they
are completely familiar with each, every, any and all of the terms, covenants,
provisions and conditions set forth therein and that there are no other
representations, promises, covenants, assurances, conditions, statements,
understandings, warranties or agreements (collectively, "Representatione')
concerning this Lease which do not appear in writing therein. This Lease
supersedes and revokes all previous negotiations, arrangements, letters of
intent, offers to lease, lease proposals, brochures, Representations, and
information or data conveyed, whether oral or in writing, between the parties
and/or their respective representatives or any other person(s) purporting to
represent either Landlord or Tenant. Each party acknowledges that it has not
been induced to enter into this Lease by any Representations not expressly set
forth herein. The parties further acknowledge that the terms and provisions
contained within this Lease have been fully, freely and fairly negotiated by and
between them.
IN WITNESS WHEREOF, the parties, either for themselves or by and through
their undersigned, duly-authorizcd representatives, have executed this Lease for
the purpose therein expressed.
17
<PAGE>
Signed, sealed and delivered
in the presence of: TENANT:
ANYTHING PC
/s/ By: Alfred W. Delisle
- ------------------- ------------------------
Witness
Name: /s/ Alfred W. Delisle
------------------------
/s/ Susan Pendoch Title: Director
- ------------------- ---------------------
Witness
LANDLORD:
AUSTIN DEVELOPMMENT COMPANY
/s/ Susan Pendoch By: /s/ Alfred S. Austin
- ------------------- ------------------------
Witness
Name: Alfred S. Austin
/s/
- -------------------
Witness Title: ---------------------
18
<PAGE>
- ------
EXHIBIT "A"
AUSTIN DEVELOPMENT COMPANY - NATIONS BANK
TRACT BEG 30 FT W AND 495.37 FT N OF SE COR OF E MILLAGE 21.54290
1/2 OF W 1/2 OF SE 1/4 AND RUN N 210 FT W 585.94 MAP NO. 39-F
FT S 210 FT TO PT 490 FT N OF S BDRY AND E 585.83 SEC TWP-S RGE-E
FT TO BEG 17 29 18
19
<PAGE>
EXHIBIT "B"
Tenant accepts space in "as is" condition, except for the following items which
the Landlord will provide at Landlord's sole expense:
- -Shampoo the carpet
[DIAGRAM OF FLOOR PLAN (PROPOSAL)
SUITE 408, NCNB BLDG.]
20
<PAGE>
EXHIBIT "C"
RULES AND REGULATIONS
The following Building Rules and Regulations have been adopted by the Landlord
for the care, protection and benefit of the Premises, the Building, and the Land
and for the general comfort and welfare of all Tenants. The use of the word
"Premises" in this Exhibit C shall be deemed to mean Premises, Building and
Land.
1. Any sign, lettering, picture, notice, or advertisement installed within
Tenant's Premises (including but not limited to Tenant Identification signs
on doors to the Premises) which is visible outside of the Premises shall be
installed in such manner, character and style as Landlord may approve in
writing. No sign, lettering, picture, notice or advertisement shall be
placed on any outside window or in any position so as to be visible from
outside the Building or from any atrium or lobbies of the Building.
2. The sidewalks, entrances, passages, halls, elevators and stairways shall
not be obstructed by Tenant or used by Tenant for any purpose other than
for ingress and egress to and from the Building and Tenant's Premises.
3. Restroom facilities, water fountains, and other water apparatus shall not
be used for any purpose other than those for which they were constructed.
4. Landlord reserves the right to designate the time when freight, furniture,
goods, merchandise and other articles may be brought into, moved or taken
from Tenant's Premises or the Building.
5. Tenant shall not put additional locks or latches upon any door without the
written consent of Landlord. Any and all locks so added on any door shall
remain for the benefit of Landlord, and the keys to such locks shall be
delivered to Landlord by and from Tenant. The Landlord shall be provided
the means of opening any safes, cabinets or vaults left in the premises.
6, Landlord shall not be liable for injuries, damage, theft, or other loss, to
persons or property that may occur upon, or near any parking areas that may
be provided by Landlord. Tenant, its agents, employees, and invitees are to
use same at their own risk. The driveways, entrances, and exits upon, into
and from such parking areas shall not be obstructed by TenanL Tenant's
employees, agents, guests, or invitees; provided, however, Landlord shall
not be responsible or liable for failure of any person to observe this
rule. Tenant, its employees, agents or guests and/or invitees shall not
park in space(s) that may be reserved for others, including "Handicapped
Parking" and/or spaces marked "Tow Zone' or "No Parking". Landlord will use
its discretion to tow away a car that violates any parking rule, at the car
owner's/driver's expense.
7. It is expressly understood and agreed that any item of any nature
whatsoever placed in Common Areas (i.e., hallways, restrooms, elevators,
parking garage, storage areas and equipment rooms) are placed at the
Tenant's sole risk and Landlord assumes no responsibility whatsoever for
any loss or damage as regards same.
8. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other means
of entry to the Premises closed and secured unless left unlocked by
janitorial service personnel or Building maintenance people.
9. Tenant shall not make noises, cause d1sturbances, create vibrations, odors
or noxious fumes or use or operate any electrical or electronic devices or
other devices that emit sound, waves or are dangerous to other Tenants and
occupants of flie Building or that would interfere with the operation of
any device or equipment or radio or television broadcasting or receptions
from or within the Building or elsewhere, or with the operation of roads or
highways in the vicinity of the Building and shall not place or install any
projections, antennae, aerials or similar devices inside or outside of the
Premises.
10. Tenant shall not install in the Premises any heavyweight equipment or
fixtures or permit any concentration of excessive weight in any portion
thereof without first having obtained Landlord's written consent.
11. Landlord reserves the right at all times to exclude newsboys, loiterers,
vendors, solicitors, and peddlers from the Building and to require
reg1stration or satisfactory identification or credentials from
21
<PAGE>
all persons seeking access to any part of the Building outside ordinary
business hours. Landlord will exercise its best judgment in the execution
of such control but will not be liable for the granting or refusal of such
access.
12. Tenant shall not install nor operate machinery or any mechanical devices or
a nature not directly related to Tenant's ordinary use of the Premises
without the written permission of Landlord.
13. In no event shall any person bring into the Building inflammables such as
gasoline, naphtha and benzene, or explosives or firearms. If by any reason
of the failure of Tenant to comply with the provisions of this paragraph,
any insurance premium payable by Landlord for all or any part of the
Building shall at any time be increased above normal insurance premiums for
insurance not covering the items aforesaid, Landlord shall require Tenant
to make immediate payment for the whole or the increased insurance premium.
14. Tenant shall comply with all applicable federal, state and municipal laws,
ordinances and regulations and Building rules, and shall not directly or
indirectly make any use of the Premises which may be prohibited thereby or
which shall be dangerous to person or property.
15. Tenant shall not:
a) Use the Premises for lodging, manufacturing or for any immoral or
illegal purposes.
b) Use the Premises to engage in the manufacture or sale of, or permit the
use of, any spirituous, fermented, intoxicating or alcoholic beverages on
the Premises.
c) Use the Premises to engage in the manufacture or sale of, or permit the
use of, any illegal drugs on the Premises.
16. If Tenant desires signal, communication, alarm or other utility or service
connection installed or changed, the same shall be made at the expense of
Tenant, with approval and under direction of Landlord.
17. Landlord shall ftimish a reasonable number of door keys to Tenant's
Premises and/or the Building which shall be surrendered on termination or
expiration of the Lease. Further, Tenant shall not alter the locks or
effect any substitution of such locks as are presently being used in
Tenant's Premises or the Building.
18. All installations in the Common Telephone/Efcctrical Equipment Rooms shall
be limited to terminal boards and connections. All other electrical
equipment must be installed within Tenant's Premises.
19. Tenant, or the employees, agents, servants, visitors or licensees of Tenant
shall not at any time or place, leave or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals or
birds shall be brought or kept in or about the Building.
20. Tenant shall cooperate and participate in all security programs affecting
the Building.
21. Landlord shall have the right to limit or control the number and format of
l1stings on the main Building directory.
22. In the event Landlord allows one or more Tenants in the Building to do any
act prohibited herein, Landlord shall not be precluded from denying any
other Tenant the right to do any such act.
23. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
any controls. Tenant shall keep public corridor doors closed.
24. Landlord reserves the right at all times to exclude the general public from
the Building upon such days and at such hours as in Landlord's sole
judgment will be in the best interest of the Building and its Tenants.
25. If the Premises are furnished with carpeting, Tenant shall provide a
Plexiglas or comparable carpet protection mat for each desk chair
customarily used by Tenant. Fore default or melessncss in these respects,
Tenant shall pay Landlord the cost of repairing or replacing said carpet,
in whole or in part, as Additional Rent when, in Landlord's sole judgment,
such repair or replacement is necessary.
22
<PAGE>
26. Landlord shall have the right to prohibit any advertising by Tenant which,
in Landlord's opinion, tends to impair the reputation of the Building or
its desirability for offices, and, upon written notice from Landlord,
Tenant will refrain from or discontinue such advertising.
27. Tenant shall not mark, paint, drill into, or in any way deface any part of
the Building or the Premises. No boring, driving of nails or screws,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall not
install any resilient tile or similar floor coveting in the Premises except
with the prior approval of Landlord. The use of cement or other similar
adhesive material is expressly prohibited,
28. No animals are permitted on the Premises with the exception of those used
to aid handicapped persons.
23
<PAGE>
CONSENT OF J. PAUL KENOTE, CPA, P.C.
April 20, 1999
Anything Internet Corporation
3020 North El Paso, Suite 103
Colorado Springs, CO 80907
Re: Anything Internet Corporation
Fka Anything, Inc.
Registration Statement on Form SB-2
Ladies and Gentlemen:
<PAGE>
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated December 21, 1998 (which contains an explanatory paragraph that
describes a condition that raises substantial doubt as to the ability of the
Company to continue as a going concern) relating to the financial statements of
Anything Internet Corporation (fka Anything, Inc.) appearing in such Statement.
We also consent to the references to use under the headings "Experts" in such
Statement.
Sincerely,
J. PAUL KENOTE, CPA, P.C.
/s/ J. Paul Kenote
J. Paul Kenote, CPA
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
INTERIM FINANCIAL DATA SCHEDULE FOR NINE-MONTHS ENDING MARCH 31, 1999
ARTICLE 5
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END JUN-30-1999
PERIOD-START JUL-1-1998
PERIOD-END mar-31-1999
CASH 18,974
SECURITIES -
RECEIVABLES 138,544
ALLOWANCES -
INVENTORY 68,347
CURRENT-ASSETS 234,894
PP&E 112,797
DEPRECIATION 25,501
TOTAL-ASSETS 410,955
CURRENT LIABILITIES 385,679
BONDS -
PREFERRED-MANDATORY -
PREFERRED -
COMMON 427,900
OTHER-SECURITIES -
TOTAL LIABILITIES AND EQUITY 410,955
SALES 2,403,629
TOTAL REVENUE 2,403,629
CGS 2,311,403
TOTAL COSTS 2,311,403
OTHER-EXPENSES 470,087
LOSS PROVISION -
INTEREST-EXPENSE -
INCOME-PRETAX (377,861)
INCOME-TAX -
INCOME-CONTINUING -
DISCONTINUED -
EXTRAORDINARY -
CHANGES -
NET INCOME (377,861)
EPS-PRIMARY ($0.12)
EPS-DILUTED ($0.12)
</TABLE>
